Poorest to suffer as cheapest food prices rise further and faster

The cost of supermarket value products has shot up by more than 20% in the past year, well above the inflation seen for food and drink as a whole.

According to the latest analysis of Assosia pricing data by The Grocer, the average value line across Asda, Morrisons, Sainsbury’s and Tesco leapt 22.3% in the year to 16 August. This was well above the grocery inflation rate for July of 14.9%, according to the Office for National Statistics.

Asda had the biggest jump across its value range, with prices up 30.3% versus last year. This was partially due to the retailer initially having the lowest average price for its Just Essentials range.

On 16 August 2022 the average Asda value product was 93p – lower than the £1.09 overall average across the traditional big four supermarkets. However, Asda’s value range price increase averaged out at 24p per product year on year, higher than the retailer average of 20p.

“Just Essentials was introduced to help keep households running on the tightest of budgets and is now one of the largest and lowest-priced value ranges of any supermarket,” said an Asda spokesman. “Since launching last year, Just Essentials has become firmly established as the number one value range with over 20% share of the market.”

Morrisons was the only major supermarket where value lines increased by less than the rate of inflation. Its prices were up just 12.2% versus August 2022.

A spokeswoman for the retailer said: “Our Savers range continues to offer customers great value on the products they buy every day and we’re continuing to invest in the brand and expand the range to meet our customers’ needs. We recently announced that we were rolling out Savers products in 500 of our convenience stores for our customers located in areas without easy access to a supermarket to ensure they are able shop entry level products.”

Sainsbury’s value lines were up 20.6% year on year and Tesco’s 19%.

“We are acutely aware of the pressures facing millions of households right now and our number one priority continues to be doing all we can to keep prices low for our customers,” said a Sainsbury’s spokeswoman.

“In the last two years we have invested over £560m to keep our prices low, and in the last quarter spent £60m on saving customers money through key initiatives like our Stamford Street own-brand value range, our biggest ever Aldi Price Match and through Nectar Prices. We’re leading the industry on passing through lower costs on the products our customers buy most often and as a result, prices on our top 100 selling products are lower than they were in March.”

Paul Stainton, UK partner at private label consultancy IPLC, suggested that the lower starting prices of value products meant price hikes would always look more impactful.

“Personally I think it’s all about maths,” he argued. “If you’re putting products up by a similar number of pennies, it’s still going to be a higher percentage on the value ranges because it’s off a much lower base.”

When it came to Asda, Stainton felt the retailer had been a little more aggressive at putting its prices up.

“One of the theories I have for that is I imagine they’ve been hurting from a margin point of view, because it has gone from 130 to over 200 products in the value range.”

Value products tended to have smaller margins, said Stainton: “It will have affected the bottom line quite dramatically.”

Ben Reynolds, deputy CEO of food and farming alliance Sustain, said: “Supermarkets continue to post record profits so they should be able to support consumers better through the current period of high inflation.

“These figures will be hard to swallow for so many hard-working families who are finding food increasingly unaffordable.”

Asda holds the second-largest value range, with 259 products, behind Tesco with 276. Sainsbury’s has 184 and Morrisons 163.

All retailers expanded the size of their ranges in the year to 16 August except Tesco, with an average increase of 7.7%.

But Stainton felt that value ranges had likely reached their peak.

“I would be surprised if we see further extensions in the size of the ranges,” he said.

“We’ve probably now peaked with the value ranges, and without doubt retailers are going to be concentrating on offering more from a promotional point of view, as well as more innovation in the standard tier and premium tier.”

Asda has already started to rationalise its value range: earlier this month it was revealed that Asda had trimmed 8% of Just Essentials products over several months. Asda’s range still stands marginally larger than the same time last year.