Food inflation is starting to fall, according to the boss of Sainsbury’s, who said shoppers were putting more items in their baskets as it began to cut prices on some basics.
Simon Roberts, the chief executive, said the supermarket was “putting all our energy and focus into battling inflation” as household budgets were “under more pressure than ever”.
“We have zero complacency on this issue,” he said, pointing to the chain’s Aldi price-matching tactic and introduction of special price cuts for its Nectar loyalty-scheme members. “Inflation is still going to be a challenge and customers need to be assured we are really on their side.”
Grocery prices are still rising rapidly: Office for National Statistics figures showed the rate of food and drink price rises has slowed, to 18.3% in May from 19% in April – still among the fastest rates in decades.
Roberts agreed with recent comments by the boss of Tesco, that food prices would not return to levels seen before the start of the cost of living crisis. He said “the cost of producing food was clearly elevated” as higher wages were “locked in” for both retailers and their suppliers, while energy prices remained stubbornly high.
“We all want energy costs to come down quicker but that is taking some time,” he said.
Roberts said relatively high food price inflation would continue until at least the end of the year with inflation on packaged goods taking longer to reduce than on fresh foods.
The UK’s second largest supermarket chain, which also owns Argos, reported that like-for-like sales – those in stores open for more than a year – excluding fuel rose by a better than expected 9.8% in the 16 weeks to 24 June, partly thanks to an increase in the number of items sold, reversing a trend of shoppers cutting back.
Grocery sales jumped 11% while general merchandise such as household goods grew by 4%, including a 5.1% rise at Argos, helped by the warmer weather towards the end of the period and the string of bank holidays. Clothing sales fell 3.7%, held back by the cool start to the spring.
Sainsbury’s said it had put more than £60m into cutting the prices of basics including bread, milk, pasta, chicken and toilet roll since March in a market where prices continued to rise.
Roberts said Sainsbury’s shoppers were only experiencing about half the rate of inflation indicated by government figures as they were sticking to budgets by buying “what they need rather than what they might want” and swapping to cheaper brands, including own-label ranges. He said the chain was also increasing prices at a slower rate than its rivals.
The retailer has increased the size of its cheapest range – now called Stamford Street – by 10%, or 20 products. Roberts indicated that sales of the range had increased by far more than that, making it the group’s fastest growing line, as shoppers looked for ways to save cash.
Supermarkets have come under public pressure to do more to alleviate the cost of living crisis amid accusations of “greedflation” – using high inflation as an excuse to raise prices further.
The competition watchdog is investigating whether supermarkets are keeping prices higher than they need to be, with a separate investigation into fuel reporting this week that supermarkets had increased profit margins during the pandemic.
Roberts would not comment on Sainsbury’s profit margins on fuel, but indicated that any gains made there were being passed on to shoppers by keeping food prices down with overall profit margins at their lowest level ever.
The retail boss refused to point the finger at food producers for keeping prices high, saying: “I don’t think there is much value to be gained from blaming different parts of the system. The only way we are going to solve [inflation] is to work together.”
Roberts said: “Food inflation is starting to fall and we are fully committed to passing on savings to our customers.”
