ALEX BRUMMER: Shame of food price surge

A high-powered lawyer friend doing a weekly shop in her local Sainsbury’s store in well-heeled west London was shocked by what she saw.

Customers both young and the elderly were taking items from the shelves, checking the price, and then placing them back. The combination of a squeeze on real incomes (pay after inflation) and surging food prices has changed shopping habits.

The Government is pledged to halve inflation from 10.1 per cent by December. The rapid improvement in annual inflation the Bank of England projected in February to 3.9 per cent was revised upwards to 5.1 per cent in its latest forecast. Under Andrew Bailey, Bank forecasting is less reliable than the weather.

The reason for some optimism is the sharp drop in energy prices. Wholesale gas is now 30 per cent cheaper than at the start of the Ukraine war. As the energy price bubble comes out of the consumer prices index, the latter should dip. The delay must be exasperating at the Treasury which had been counting on faster transmission.

The real sinner in our current cost of living shock is food. It was reported in March that the price of food was 19.2 per cent higher than a year earlier – and at its highest level for 45 years. Subsequent surveys from retail monitors do not suggest a rapid improvement.

There will be an intense focus on what is going wrong in Britain’s food supply chain this week. Rishi Sunak is due to host a farm summit at Downing Street tomorrow. Elsewhere, the Environment, Food and Rural Affairs Committee is to probe how profitability and risks are shared through the food supply chain. Whether these forums are capable of coming up with meaningful answers is uncertain.

That will require a rapid investigation by the Competition and Markets Authority.

UK farming is having a torrid time as a result of disruptions caused by the pandemic, labour shortages post-Brexit and the unfair combat between agriculture producers and the supermarkets.

Agriculture also is a victim of surging energy prices and fertilizer shortages.

On the surface the UK would appear to have one of the most competitive retail set-ups with four major supermarket chains plus the challenge from the German discounters. Price wars over milk, butter and bread have featured recently. 

Yet there is a reluctance in many of the chains to substitute pricey branded items with ‘own labels’ and an obsession with maintaining profit margins. There is not much sign of rebalancing the interest of the consumer with those of management and shareholders.

The recent sight of Tesco boss Ken Murphy marching off with a pay packet of £4.4m (down from £4.7m in the previous year) as the public struggles to afford food is obscene. Murphy has faced none of the challenges of his predecessor Dave Lewis who guided Tesco out of the financial doldrums and through the pandemic.

Much of the blame for food inflation rests with the big branded food and non-alcoholic beverage companies – such as Kraft Heinz, Nestle, Coca-Cola and Unilever – who have striven to maintain profit margins in the post-pandemic era.

No one has explained how this ‘greedflation’ can be justified in an age of environmental, social and governance (ESG) investment. The great food price bubble is a moral and ethical outrage.