UK supermarkets reject allegations of profiteering from crisis

London — British supermarket executives on Tuesday rejected allegations they are profiteering through a cost-of-living crisis, telling MPs they are not passing on price pressures in full to prevent customers from going elsewhere.

Soaring food inflation has contributed to the biggest squeeze on living standards in Britain since records began in the 1950s and has prompted questions about who is responsible for record jumps in grocery bills.

Similar pressures across Europe have prompted governments in France and Hungary to impose price caps on some essentials, but executives from Tesco, Sainsbury’s, Asda and Morrisons told parliament that is not needed in Britain.

“This is fiercely competitive as a market,” Sainsbury’s food commercial director, Rhian Bartlett, told MPs on the House of Parliament’s business & trade committee. “We’re generally considered one of the most competitive food markets in the world. I’m not sure what price caps would add to that process, other than bureaucracy.”

British food prices started rising well over a year ago, as Russia’s invasion of Ukraine compounded pandemic-related tensions in the supply chain. Food and drink inflation was running at 18.3% in May, according to official data.

Bartlett said Sainsbury’s had held back from passing on all the pricing pressures it faces, saying: “We are inflating behind our input costs, and we’re inflating wherever possible behind the market.”

The retail executives said that on top of higher energy costs they are also having to juggle rising wage bills, commodities and logistics costs. At the same time they face fierce competition from the German discount groups Aldi and Lidl which have driven prices down in Britain in the past decade.

The industry has warned there is also a lag between a drop in wholesale and retail prices. Despite that, the cost of some goods is starting to fall, such as milk, bread, pasta and oil.

Asked by one MP about “a grotesque display of profiteering”, Tesco’s commercial director, Gordon Gafa, said the group made 4p profit for every pound spent, while Bartlett said it made less than 3p on the same measure, with both executives arguing that did not represent a high profit margin.

The industry points out that major consumer goods firms such as Unilever and Nestlé have profit margins of 16%-17%.

Tesco, Britain’s biggest retailer, has predicted it will have broadly flat retail adjusted operating profit in 2023.

Bank of England policymaker Swati Dhingra also said there is little evidence of companies failing to pass on lower prices so far, when she looked at their most recent annual earnings reports. “It’s not very convincing to argue — at least as of yet — that grocery inflation is driven by ‘greedflation’,” she said.

Reuters