Tesco has told MPs it is the “most competitive we have ever been” as supermarket chiefs were quizzed on allegations of profiteering during the cost-of-living crisis.
Asked about its profit figures, Tesco commercial director Gordon Gafa told the Business and Trade Committee: “We have not made more profit year-on-year. We have actually made 7% less profit versus our last financial year. It’s important to be clear on that from the outset.”
Supermarket senior executives from Tesco, Asda, Morrisons and Sainsbury’s have been questioned by MPs over eye-watering food inflation as the latest figures add to hopes that price hikes have passed the peak.
Last week the Office for National Statistics published the latest inflation figures showing that food price rises have eased slightly but remain at a stubbornly high 18.4%.
It comes as supermarkets are under increasing pressure to hand down savings they are seeing on wholesale items to consumers, who have faced punishing food price inflation in recent months.
Addressing Mr Gafa, committee chairman Darren Jones said: “According to your 2018/19 annual accounts you made a profit of 1.6 billion and in 2021/2022 accounts you made a profit of 2.03 billion. So you’ve increased your profit quite significantly there, haven’t you?”
Mr Gafa replied: “As I say, profits year-on-year for the group are down, we have sold more year on year and we have made less.
But Mr Jones pressed: “How can it be possible that you are making hundreds of millions of pounds in additional profit?”
Mr Gafa replied: “I’m referring to our latest accounts for 2022/23 so that may be the discrepancy.”
We’ve spent £560 million on keeping prices low, battling inflation and are doing absolutely everything we can to keep prices as low as possible for customers— Rhian Bartlett, Sainsbury’s food commercial director
Sainsbury’s told the committee it was not passing all the costs of inflation in its supply chain to customers, as it too was quizzed over whether supermarkets are profiteering amid rampant food inflation.
Rhian Bartlett, food commercial director at Sainsbury’s, told the Business and Trade Committee: “We are acutely aware about the cost-of-living impact on our colleagues and how difficult they are all finding it right now.
“We’ve spent £560 million on keeping prices low, battling inflation and are doing absolutely everything we can to keep prices as low as possible for customers.
“In the most recent year we made lower profits, at £690 million – input costs are not being fully passed through to our shelf prices.
“We’ve submitted lots of detail on that to the CMA (Competition and Markets Authority) and have had good discussions with the CMA.
“We are inflating behind our input costs and inflating wherever possible behind the market.”
The committee also heard from the supermarket representatives that they were not in favour of a cap on the price of basic food items, recently considered by the Government.
We’re 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— Rhian Bartlett, Sainsbury’s food commercial director
Asked about speculation about a cap, Ms Bartlett said: “This is fiercely competitive as a market.
“We’re 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.
“Where we’ve seen them applied in France and so on it can have unintended consequences – of selling out and other prices moving up and down.
“So I think this market self-regulates to a positive extent, so we wouldn’t be in support of price caps.”
Data from the BRC-NielsenIQ Shop Price Index suggested retailers are beginning to pass on lower wholesale costs, with food inflation easing for a second month running as supermarkets cut the price of household staples.
Food inflation decelerated to 14.6% in June, a relatively significant drop from May’s 15.4% and below the three-month average of 15.2%.
Fresh food inflation saw a significant slowing from May’s 17.2% to 15.7% as retailers dropped the prices of staples including milk, cheese and eggs.
