The UN may have warned this week that rocketing food prices could prompt worldwide political unrest but UK supermarkets are finally keeping a lid on food inflation, The Grocer can exclusively reveal.
The UN's emergency relief coordinator Sir John Holmes claimed global food prices had risen 40% since last summer, causing shortages and sparking violent protests across developing countries. But in the UK at least, consumers are finally seeing prices hold and even fall in some cases. For the first time since November, the average cost of our trolley of 100 secret grocery items, measured in The Grocer Price Index, has stopped rising across the big retailers.
From December to February the trolley price leapt 2.8% to a record high of £185.27, but rather than continue the upward inflationary trend, March's trolley price remained virtually level at £185.26.
Analysts credited Morrisons' continued focus on low prices and a reaction by its rivals to its strong recent sales growth with halting the upward trend. Morrisons and Asda made the deepest price cuts this month and reduced their month-on-month trolley totals by 1.5% and 1% respectively. Somerfield's total dipped by 0.3%. But Tesco's trolley rose 1.6% in price, Waitrose's by 0.6% and Sainsbury's - the cheapest retailer for the first time in 11 months in our regular weekly The Grocer 33 survey - was 1.3% more expensive. A Sainsbury's spokeswoman said that though its trolley price had risen over the past month, it was successfully keeping a lid on prices and had held booze at pre-Budget prices. Meanwhile, Asda said it was trying to absorb commodity cost hikes instead of passing on higher prices to consumers. "We can't control inflation on raw materials but can control the impact on our business by reducing prices as much as possible," said a spokesman.
Shore Capital analyst Darren Shirley believed the stable inflation rate reflected the general slowdown in spending and Morrisons' successful Christmas trading. "Retailers have recognised shoppers are having to tighten their belts because of the credit crunch," said Shirley. "Promotional activity has increased, and Asda, Tesco and Sainsbury's certainly took note of Morrisons' successful Christmas by increasing their own promotional activity."
Indeed, year-on-year promotional activity across the six retailers in the four weeks up to 22 March was up two percentage points to 27.9% on all food sales, according to Nielsen. Mike Watkins, senior retail manager at Nielsen, agreed Morrisons had sparked the wave of promotional activity. "Morrisons is currently gaining shopper spend from the rest of the big four who have been forced to react by implementing lower day-to-day prices, bogofs and other offers," said Watkins. "Its sales are performing much better than people expected and, currently, there isn't a weak player in the big four."
Morrisons claimed its focus on price was part of its ongoing strategy. "We constantly check price positions, as well as promotional activity across the whole weekly shop, including more than 100 bogofs so customers can continue to enjoy fresh, quality, affordable food," said group trading director Martyn Jones.