Leading grocery brands fuelling greedflation, UK regulator finds | Food & drink industry

Most makers of popular brands in areas such as infant formula, baked beans, mayonnaise and pet food fuelled greedflation by putting up prices faster than their costs rose, the competition regulator has found.

The latest release from the Competition and Markets Authority (CMA) in its review of the grocery market concluded that over the last two years about three-quarters of branded suppliers with products in those sectors increased their profits by raising prices more than their costs increased.

“Food price inflation has put huge strain on household budgets, so it is vital competition issues aren’t adding to the problem,” said Sarah Cardell, the chief executive of the CMA. “While in most cases the leading brands have raised prices more than their own cost increases, own-label products are generally providing cheaper alternatives.”

Food price inflation continues to run at historically high levels despite falling to 4.6% in October, with the consumer group Which? estimating that supermarket prices have increased by more than a quarter over the last two years.

The watchdog’s latest release, like its initial investigation into retail competition in the groceries sector published in July, found that most of the food inflation since early 2021 had been driven largely by passing rising input costs on to consumers and that overall profit margins had fallen across most branded manufacturers since 2021.

However, it identified several product lines where prices rises of branded goods had outstripped cost increases. The findings will fuel accusations that brands have made the cost of living crisis worse by raising prices unnecessarily to protect profit, a phenomenon called greedflation.

The CMA said that of the 10 product categories it examined in depth, it had the biggest concerns over baby formula, where prices have risen by 25% over the last two years, with two companies accounting for 85% of market share.

“Unlike other products examined, there is little evidence of parents switching to cheaper branded options as prices have risen and very limited availability of own-brand alternatives,” Cardell said.

“We’re concerned that parents may not always have the right information to make informed choices and that suppliers may not have strong incentives to offer infant formula at competitive prices. We will investigate this further and consider whether changes to regulations are necessary to ensure parents can get the best deal possible.”

The CMA said that it also intends to launch an investigation into loyalty scheme pricing in January, where supermarkets only offer deals to customers who sign up to their scheme.

“We have also seen an increase in the use of loyalty scheme pricing by supermarkets, which means that price promotions are only available to people who sign up for loyalty cards,” Cardell said. “This raises a number of questions about the impact of loyalty scheme pricing on consumers and competition.”