Inflation bites at supermarkets as prices rise at fastest rate for decade

The cost of groceries is now 5.2% higher than it was a year ago, with inflation in the past four weeks hitting its highest level in nearly a decade, according to new data.

Grocery price inflation is seeing more shoppers turning to cheaper products and supermarket own-brand labels, while customers are also making fewer trips to stores to save on petrol costs, Kantar said.

Prices are rising fastest in markets such as savoury snacks, dog food and cat food, with jumps not seen since April 2012, it added.

The data company also revealed that, with life returning to normal following the Covid-19 pandemic, shoppers are eating out more – especially among commuters who are returning to offices in larger numbers.

Fraser McKevitt, head of retail and consumer insights at Kantar, said: “More and more we’re going to see consumers and retailers take action to manage the growing cost of grocery baskets.

“Consumers are increasingly turning to own-label products, which are usually cheaper than branded alternatives.

“Own-label sales are down in line with the wider market but the proportion of spending on them versus brands has grown to 50.6%, up from 49.9% this time last year.

“Meanwhile the grocers are also adapting their pricing strategies in response to the rising cost of goods.

“One trend we’re already tracking is the move away from selling products at ‘round pound’ prices. The percentage of packs sold at either £1, £2 or £3 has dropped significantly from 18.2% last year to 15.9% this March.”

Despite prices being higher in stores, total sales fell 6.3% in the 12 weeks to March 20 compared with a year ago. On a two-year basis they were up just 0.7%, although this also included the period when shoppers stripped shelves bare as the pandemic first hit.

Mr McKevitt said: “It’s no surprise that sales are down over the latest period as consumers are now more confident eating out of the home again.

“As well as enjoying meals out with friends and families, people will have also been grabbing food and drink on the go from supermarkets while travelling or at work.

“Those sales aren’t included in these take-home figures, but they will be adding to the grocers’ overall performance.

“What we’re really starting to see is the switch from the pandemic being the dominant factor driving our shopping behaviour towards the growing impact of inflation, as the cost of living becomes the bigger issue on consumers’ minds.”

The shift saw households make 15.4 visits to the supermarket on average last month, compared with 15.6 trips in March 2021.

Mr McKevitt added: “Higher fuel prices could be playing a role here too as people try to save petrol by visiting the supermarkets less often – something for us to keep a close eye on over the coming weeks.”

Two years since the start of the pandemic has seen some shifts in shopping habits become permanent, Kantar said, particularly in online shopping.

Online sales made up 12.6% of total sales in March, compared with just 8% three years ago and researchers found that shoppers over 65 were the biggest adopters, with 9% using it three years ago against 18% today.

Discounters Aldi and Lidl remained the fastest-growing supermarkets during the period, with both seeing sales up 3.6% over the 12 weeks compared with a year ago.

This pushed Aldi to its biggest market share in the UK to date, with 8.6%. Lidl’s market share hit 6.4%.

The hardest-hit supermarkets were Asda and Morrisons, which saw sales drop 9.9% and 11.5% respectively, denting their market share.