The imposition of the soft drinks ‘sugar tax’ has reversed the trend of declining price inflation at the supermarkets.
A spike in soft drinks prices since the Soft Drinks Industry Levy came into force on 5 April meant the Grocer Price Index, compiled by Brand View from over 60,000 big four supermarket SKUs, rose from 0.8% to 1.2% in the month to 1 May.
Annual inflation in soft drinks jumped to 3.8% during the month, with prices up 5.4% on a month-on-month basis.
This time a year ago, prices were actually falling by 1.7% as the under-fire category had failed to catch last year’s inflationary wave.
Average monthly deflation was 0.2% over the 12 months before the tax came in, compared with average overall GPI inflation figure of 1.9%.
Despite widespread industry reformulation, the sugar tax has effectively wiped out two-and-a-half years of category deflation, with soft drinks prices at their highest since September 2015.
The jump in drinks prices was the primary driver of the overall GPI rising back to 1.2% - a reverse of the trend of declining inflation since it hit a high point of 2.9% in the month to 1 October.
Despite the uptick, overall supermarket inflation remains at a lower level than a year ago, though on a month-on-month basis the GPI was up 1.6% - the highest monthly jump since February 2013.
Tesco remains a clear outlier in terms of price inflation, which is running at 3.4%, bolstering its sales outperformance in the latest market share figures from Kantar Worldpanel and Nielsen out this week.
Tesco’s annual inflation was higher than the 2.6% the previous month, but not as high as the 4.1% it recorded in the month to 1 March, which represented its highest level of annual inflation for over five years.
Inflation remains much more modest among the rest of the big four. Sainsbury’s remained in annual deflation following price cuts on around 900 lines. This impacted on its relative sales underperformance compared to its big four contemporaries in the Kantar and Nielsen reads. It recorded annual deflation of 0.4%, though this had moderated from -0.9% in the previous month. Morrisons’ annual prices remain almost flat at 0.1% and inflation at Asda eased from 0.7% to 0.5%.
Waitrose, not included in the overall GPI figure, recorded price inflation of 0.6% after being flat last month.
On a category basis, the highest levels of inflation - aside from soft drinks - were in biscuits, confectionery & snacks at 3.3%, dairy at 3% and chilled at 2.8%.
Two categories - household goods (-1.2%) and health & beauty (-0.6%) - recorded annual price deflation. Half of the GPI’s 14 categories showed a higher level of inflation in the month to 1 May than in the previous month.