How supermarkets can do more to help their customers - Rocio Concha of Which?

My business has been supplying supermarkets for years, and the past year has been the toughest in memory. Given their huge profits, shouldn’t supermarkets be doing more to support customers?

Who is to blame for the eye-watering increases to the price of the weekly food shop, which is coming on top of soaring energy bills and high prices at the petrol pumps? The reasons are complex - and down to a mix of global factors, including rising energy costs and the impact of the Ukraine war, as well as more specific UK supply chain issues.

But against this backdrop and unprecedented times, some supermarkets have still projected huge profits in recent weeks. Sainsbury’s said its pre-tax profits would be between £630 to £690 million, while Tesco expects supermarket operating profits of between £2.4 billion and £2.5 billion. These are large profits suggesting supermarkets are not having to absorb the same financial pain as their customers in this cost of living crisis.

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There have also been suggestions of some food firms using record-levels of inflation as an excuse to push their prices even higher. Supermarkets and food manufacturers will be facing their own inflationary pressures, but their actions during this cost of living crisis will inevitably be viewed through the prism of the hardship millions of Britons are enduring.

Millions of consumers are struggling to cope with the cost of living crisisMillions of consumers are struggling to cope with the cost of living crisis
Millions of consumers are struggling to cope with the cost of living crisis

Which?’s supermarket inflation tracker found that the price of basic groceries such as butter, milk and baked goods had risen by up to 30 per cent year on year in some cases. Both budget and own-brand ranges were subject to higher rates of inflation, 20.3 per cent and 18.5 per cent respectively, than premium (12.6 per cent) and branded (12.5 per cent) counterparts, squeezing the budgets of those on lower incomes even more tightly.

Historically high profits are causing consternation. Politicians have called them “outrageous”. And there are telling signs that consumer confidence in some supermarkets is taking a knock too. Regardless of what is driving the price increases, people think supermarkets aren’t doing enough to shield them from the impact. Which? research shows that recent price rises saw trust in the sector fall from +67 in May 2021 to +42.

While it might be possible to trade down the range of products you buy, or to switch to a cheaper supermarket, many people have cut back but still can’t make the sums add up.

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Working with researchers at the University of Leeds Consumer Data Research Centre, we created a Priority Food Places index, identifying areas of the country that are most in need of better access to larger supermarkets (where weekly shops are cheaper) or more affordable and healthy foods. We’ve seen first hand the impact that a lack of access can have on local communities.

That’s why at Which? we’ve led the charge and challenged supermarkets to use our index and to do more to help their customers. We know supermarkets have faced their own cost pressures, but their success over the Christmas period only serves to underline the fact that they have leeway to do more.

Our cost of living campaign calls on supermarkets to do three major things. First - ensure their pricing, especially unit pricing, (eg price per 100g or per Kg) is more transparent, so it’s easier to understand which items are genuinely good deals.

Encouragingly, the Competition & Markets Authority has shown it could take action by launching a review of grocery pricing. Second, make sure budget lines for affordable essential items are widely available, including in their convenience branches and especially in areas of the country where there is the greatest need. We hear too often from consumers that they are struggling to find the cheapest products in their local supermarket. Third, direct marketing budgets and promotions to tailor support to those who are struggling.

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That means fewer flashy ad campaigns and BOGOF deals on crisp multipacks and more offers, top-ups, vouchers and loyalty card benefits on a wide range of nutritionally-balanced products, targeted at customers who could really use the help.

Supermarkets are an essential sector, relied on by millions to put food on our tables. We were reminded of their importance during the pandemic - and they are again required to help us get through difficult times.

Rocio Concha is Director of Policy and Advocacy at Which?