Top grocery brands put their prices up more aggressively than could be justified by rising costs during the inflation crisis, the competition watchdog found today.
The Competition and Markets Authority (CMA) said there was evidence that average profit per unit sold for staples such as beans, mayonnaise and pet food, has increased for branded products.
However, it also found that supermarket customers simply switched to cheaper own branded alternatives and so were not paying higher prices at the till.
But the watchdog noted one glaring exception, baby formula, where a lack of own-brand products and a reluctance to ‘trade down’ has led to manufacturers making bigger profits per unit at the expense of parents.
The Competition and Markets Authority (CMA) today published an update on a review into grocery prices that it launched in the spring. Food prices have soared in 2023, with items like bread and cheese rising by more than 20% year-on-year.
But the CMA said there was little evidence of supermarkets themselves profiteering as the high level of competition in the sector means profit margins remain low.
Manufacturers, though, were not let off the hook. The CMA said that while input costs such as energy and key ingredients have increased, prices have risen even faster than could be explained by these costs.
For supermarkets’ own-brand products, which were cheaper to begin with, this kind of profiteering has been “less prevalent”. Customers have responded by buying more own-brand foods rather than paying more for branded products.
Yet infant formula “is an exception”, the CMA said. Here, Aldi is the only supermarket to offer an own-brand product, and parents are less likely to turn to a cheaper option as prices rise.
The price difference between the most expensive brand of baby formula in the study, Aptamil Advanced, and Aldi’s own-brand formula adds up to £500 over the first year of a baby’s life.
A spokesperson for Danone UK & Ireland, makers of Aptamil, as well as Cow & Gate which was the cheapest branded formula, said: “We recognise the challenges faced by parents due to inflation. During this difficult period, we have worked very hard to absorb the significant cost increases we have faced, make savings, and minimise any price increases. Danone is proud to offer parents - who cannot or choose not to breastfeed - a range of formula milk products at different prices.
“In order to offer parents the best value, and to ensure we are as competitive in the market as possible, we have launched new larger, better value formats. We currently offer the best value formula milk pack on the market. We have also launched a new smaller, low priced pack size to support budget-conscious families, including those conscious of their weekly budgeting.