In an effort to tackle cost of living pressures in groceries, the Competition and Markets Authority (CMA) has issued an initial update with the publication of two reports. The first report assesses retail competition in the UK grocery sector, while the second reviews unit pricing practices across major retailers.
The CMA’s focus on grocery competition comes at a time when food and grocery prices are on the rise, and it aims to ensure that competition is effectively keeping price rises as low as possible. The reports examine the extent to which rivalry between retailers is driving down prices and enabling consumers to shop around for the best deals with confidence.
The CMA has reviewed the effectiveness of retail competition in the UK grocery sector over the past two months. Despite food price inflation reaching historically high levels, the evidence collected thus far indicates that competition issues have not been the primary driver of these price increases. Operating profits in the retail grocery sector have actually fallen by 41.5% in 2022/23 compared to the previous year, and average operating margins have dropped from 3.2% to 1.8%. This suggests that rising costs have not been fully passed on to consumers.
On a positive note, consumers have been actively shopping around to find the best deals, and the rise of discount retailers like Aldi and Lidl has put pressure on other supermarkets to keep prices competitive. However, the CMA acknowledges that not everyone can fully benefit from strong competition, particularly those who cannot access large stores or shop online and may rely on higher-priced convenience stores.
The CMA’s review of unit pricing practices among major retailers has identified compliance concerns with the Price Marking Order (PMO). Some retailers show relatively minor issues with compliance, while others have more significant problems, particularly among variety retailers.
Inconsistencies in unit pricing rules have led to difficulties in comparing prices on a like-for-like basis. For instance, some products are priced per 100 grams while others are priced per each item, making comparisons challenging for consumers. Additionally, unit pricing information is sometimes missing or incorrectly calculated, both in-store and online. The CMA has highlighted problems with legibility and the lack of unit pricing display for products on promotion.
The CMA is calling on the government to reform the legislation on unit pricing to address these issues and help shoppers easily spot the best deals. It has also written to retailers not fully complying with the PMO, urging them to make changes or face enforcement action.
CEO Sarah Cardell emphasised the importance of making price comparisons accessible to everyone, especially those facing financial hardships. The CMA’s work in the grocery sector aims to create an environment where consumers can confidently find the best prices and keep cost of living pressures in check.
