The boss of Morrisons has admitted that supermarkets have increased profits at the petrol pumps as he was quizzed by MPs alongside executives from Tesco, Sainsbury’s and Asda who denied they were making more money from keeping food prices high.
David Potts told MPs on the business and trade committee: “I think there is more profit at the retail end of fuel.” He said supermarkets did not make much money on selling petrol and that energy, labour and transport costs had added to the “barrel price” of oil to force up prices but admitted “we can do more”.
Other retail leaders told the committee that they were waiting for a competition watchdog report on fuel pricing by supermarkets. MPs said the report indicated that supermarkets’ profit margins have doubled to 8% on fuel since 2017.
The Competition and Markets Authority is expected to recommend that supermarkets must share local fuel prices on a comparison website or app in order to increase transparency and help bring down prices – a tactic tried successfully in Northern Ireland. All the supermarkets said they would welcome such a move.
The RAC motoring group said that a price checker would be welcome but blamed high prices on the domination of petrol retailing in the UK by a handful of large supermarkets.
“When the wholesale price of diesel fell this spring, we saw average retailer margin reach 22p a litre which was more than three times the long-term margin of 7p. This cannot be allowed to continue when households are having to contend with a cost of living crisis,” RAC fuel spokesperson Simon Williams said.
“We believe the biggest retailers that sell the most fuel should be compelled to charge a reasonable margin per litre.”
Rhian Bartlett, food commercial director at Sainsbury’s, said: “We are managing the situation for customers as best as we possibly can and trying to keep prices as low as we possibly can.”
At the hearing on Tuesday, which aimed to find the reasons why inflation remains stubbornly high, especially on food, despite falls in some global commodity prices, MPs asked if supermarkets were acting as a cartel which was “pegging prices to Aldi”. The cost of groceries rose by 16.5% in June according to analysts at Kantar.
Jane Hunt, the Conservative MP for Loughborough, said: “In 1978 there were many more supermarkets. Now there are very few and you all talk about Aldi – are you in fact a cartel?”
MPs said that supermarkets were not putting enough of their cheapest products in small local stores, used by some of the most vulnerable households with limited access to transport, and were making short-term deals with farmers so that they went out of business, reducing food supplies.
Darren Jones, the Labour chair of the committee, said that profits for listed supermarkets Tesco and Sainsbury’s appeared to have risen significantly between 2018 and 2022 while they had paid millions more out in dividends and in bonuses to their top executives.
The MPs also raised union Unite’s accusation of “grotesque profiteering” by the major chains.
Tesco, Sainsbury’s, Asda and Morrisons said profits had in fact gone down, once one-off changes, such as Sainsbury’s acquisition of the Argos catalogue shop, and Tesco’s buyout of wholesaler Booker, were taken into account. They claimed they were cutting costs to keep prices as low as possible for their shoppers.
The retailers blamed rising energy, labour and commodity costs as well as difficulties with food supply, such as restrictions on access to sunflower oil and wheat caused by the war in Ukraine or the impact of higher feed prices and avian flu on egg and chicken production, for rising prices.
Potts said that egg prices were likely to normalise as UK flocks were now being rebuilt although Bartlett at Sainsbury’s said there were issues with getting planning permission for chicken sheds.
Gordon Gafa, the commercial director of Tesco’s packaged division, said: “We make 4p in every pound, that is not any example of profiteering.” He said Tesco had “doubled down on competitiveness”, claiming the UK’s biggest supermarket was the “most competitive we have ever been”.
Supermarkets said they did not think that price controls – which were floated by the government last month – would help limit food inflation.
Bartlett from Sainsbury’s said: “This is a fiercely competitive market. We are 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.”
She said that where such controls had been applied – such as France – they had led to “unintended consequences such as selling out and other prices moving up and down around it”.
