Is the milk price war in the supermarkets a sign that food prices can FINALLY drop from current record highs?
- Tesco, Sainsbury’s, Aldi and Lidl have lowered milk prices this week
- The move has experts hopeful that competition could depress food prices
Four supermarkets cut milk prices this week, with competition raising hopes that record food prices could finally begin to fall.
According to experts from the British Retail Consortium, the total cost of food rose 15 percent in March compared to February, while fresh food prices rose 17 percent – a new record.
Alternative figures show that food prices increased by 17.5 percent in the year to March 2023, according to Kantar analysts.
It means shoppers are facing an £837 increase in their average annual food bill.
But experts say there may be “light at the end of the tunnel” as four supermarkets all bucked the trend this week by slashing milk prices.
Talking store: The price of groceries at the supermarket has skyrocketed, causing households to pay record prices for their weekly groceries
Tesco led the charge on Wednesday, cutting the price of a four-litre carton of milk from £1.65 to £1.55, two pints from £1.30 to £1.25 and a pint from £95 to £90.
Sainsbury’s then followed suit and reduced milk prices to £1.25 for two pints and 90p for one pint, as did Aldi and Lidl.
Both Lidl and Aldi have matched Sainsbury’s and Tesco’s move by reducing two pints to £1.25 and a single pint to 90p.
Supermarkets have previously come under fire for the way they raise prices for consumers.
During an interview with the BBC in February, Tesco’s chairman accused other companies of ‘using inflation as an excuse to raise prices more than necessary’.
But analysts said this week’s milk price cuts showed that competition in supermarkets may be willing to cut costs in other areas of the grocery business as well.
Laith Khalaf, chief of investment analysis at stockbroker AJ Bell, said the price cut showed “some light at the end of the inflationary tunnel for consumers.”
He said: ‘It also suggests that the fiercely competitive supermarket sector in the UK is not going to turn a profit just like that when wholesale costs fall, because there is always a competitor waiting in the wings to do some undercutting.’
Richard Hunter, head of markets at stockbroker Interactive Investor, said: ‘The supermarket price war has been going on for some time and in the current environment, basement prices have become extremely important to the pressured consumer.
“The reduction in milk prices will be a welcome development, but with food inflation generally still around 17 percent, the upward pressure on prices is almost intact.”
Why are food prices so high?
Global food prices started to rise after the pandemic as economies started to recover, and the impact, coupled with the invasion of Ukraine, has been severe.
Higher energy bills have also forced producers to raise prices, which spilled over into everyday products such as milk, eggs and bread.
But there are also long-term structural problems. The impact of higher labor costs dates back long before the invasion and pandemic in Ukraine.
Brexit has been an aggravating factor as recruitment has declined in the more labour-intensive parts of food production, which often relied on workers from Eastern Europe.