Responding to today’s CMA report, “Price inflation and competition in food and grocery manufacturing and supply”, Andrew Opie, Director of Food & Sustainability at the British Retail Consortium, said:
“We welcome today’s CMA report, which confirms many of the BRC’s own findings about the grocery sector. The CMA found that own-label goods offer competitive prices for consumers, with margins falling from 4% in 2020 to less than 2% in 2022. While many branded manufacturers had increased their unit profitability during the cost of living crisis, savvy consumers have been trading down to supermarket own-label brands in order to get the best possible value. The increased availability of own-label products is just one way in which food retailers have supported their customers with the rising cost of living.”
“We acknowledge the CMA’s concerns on baby formula – a market dominated by two brands. The CMA notes that consumers could make significant savings by switching to cheaper brands or own-label products, all of which provide the necessary nutrition for a healthy baby.
“Retailers will continue to deliver excellent value for their customers. Whether it’s everyday low value, or genuine bargains through loyalty schemes discounts, retailers know they have to demonstrate clear value to get customers through their door. However, this continues to be challenged by rising costs, from hundreds of millions in additional business rates, to higher labour costs from the rising NLW. “
The report shows:
1. Own label goods offer competitive prices for consumers
[Page 6] “for most products, own-label margins are low and have generally fallen in the most recent financial year”
[Page 6] “consumers can have confidence that, for most of the product categories we have considered, they are getting competitive prices where they are able to access and choose own-label alternatives.”
2. Many branded manufacturers had increased unit profitability during the cost of living crisis
[Page 7] “around three-quarters of brands that provided comparable data have increased their unit profitability during the recent period of high food price inflation”
3. Savvy consumers have been trading down to supermarket own-brands
[Page 7] “Across most of our product categories where brands are present, we have observed switching to cheaper own-label products.”
[Page 11] “we have been reassured, from a competition perspective, by the availability of cheaper alternatives (including own-label) in these product categories, and evidence that consumers are able and willing to switch to these. In doing so, they have mitigated cost-of-living pressures for themselves and generated competitive pressure on the large brands in these categories.”
4. CMA’s concerns on baby formula – a market dominated by two brands.
[Page 11] “there is little evidence that consumers have switched to cheaper brands, or own-label alternatives. This is despite there being significant savings from doing so, and despite all infant formula products providing all the nutrients a healthy baby needs, until complementary feeding is introduced.”
[Press release] “the market is highly concentrated (2 firms have around 85% of the market share) and brands have maintained high profit margins over the last 2 years.”