SUPERMARKETS SEE RECORD GROWTH AS PRICES RISE

The recent heatwave triggered a dash for frozen foods and soft drinks, and of course, beer.

Sales of ice cream and cider jumped by 12% and 16% respectively, adding £58m in sales, while shoppers have seen the price of fish and butter increase by about 14% and 20% respectively.

But recent grocery inflation of 3.2% has added an extra £133 to the average household’s annual shopping bill.

For the first time in over four years, all the major supermarkets reported higher year-on-year takings.

Tesco enjoyed its fastest growth since April 2012 with an increase of 27.8% as it attracted a further 369,000 customers, while Morrisons and Sainsbury’s increased sales by 3.7% and 3.1% respectively.

Market research data shows that sales in the 12 weeks to June 18th shot up to 5% – the strongest increase since March 2012. Last year, sales fell by 0.2%.

INFLATION IS ON THE INCREASE, AND HOUSEHOLD BUDGETS ARE BEING SQUEEZED

The boss of Aldi UK had this to say:

“Inflation is rising, and household budgets are increasingly coming under pressure. This is encouraging more shoppers to make the switch to Aldi and remain loyal thanks to the massive investment in our range and the lowest prices in the UK.”

But the average family will not be rejoicing because of supermarket gains as the effect of inflation is starting to take its toll.

WHY ARE FOOD PRICES RISING NOW AFTER YEARS OF STEADY FALLS?

With the arrival of the major discounters such as Aldi and Lidl, the established supermarkets have lost their grip on their monopoly of food and household goods retailing.

From complete obscurity, shoppers flocked to these stores to take full advantage of their low prices.

It came as a great surprise to the market leaders who were relying on their ‘own brands’, good service and customer loyalty. Even middle-class consumers who were more accustomed to shopping in more exclusive outlets such as Waitrose and Marks & Spencer were making a move.

This created a price war between the more established retailers and found them slashing profits to retain market share.

However, following the Brexit referendum the pound collapsed, losing up to 15% of its value compared to other countries.

This meant that the prices of imported food were bound to rise.

The major chains were unaffected for six months or so, as they had sufficient stock to keep prices steady.

Even when the impact of price increases began to filter through, they still kept their prices low, preferring to reduce their profits rather than their market share.

However, price increases were inevitable, and are now filtering through to the consumer.

AN INDEPENDENT FORECAST

Independent retail analyst Trevor Lovelock has this stark warning for consumers:

“Whether you agree with leaving the EU or not, the effect on prices is dramatic and can only increase as time goes by.”

“What many people still fail to understand is that the UK is a net importer of food, importing more that 50% of its needs from overseas, mainly from the EU. The effect of Brexit has yet to be felt as we have yet to leave the trading block, and are still members of the single market and enjoy the benefits of the customs union.”

“Once this comes to an end, and we can no longer trade tariff free with Europe, the effect on prices is sure to be far more dramatic.”

“Any trade deals we may reach with other countries are years away, so we’re likely to be bound by the rules and tariffs of the WTO (World Trade Organisation), which will be far less favourable than the agreements we already have as a member of the EU.”

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