Food companies are using inflation to hike prices unnecessarily, Tesco boss warns

LONDON, UNITED KINGDOM - JANUARY 11: A view of the shelves in a supermarket as the United Kingdom struggles with the highest inflation rate of the last 40 years, in the city of London, on January 11, 2023. Market coupons have started to be distributed to the people with low-income, who are having difficulties due to the increasing living costs. Vouchers issued by local governments will be valid at major supermarkets such as Tesco, Asda and Morrisons. (Photo by Gultekin Bayir/Anadolu Agency via Getty Images)
Food prices are rising at record levels. (Getty)

Some food companies could be raising prices more than needed, using the current economic climate as an excuse, a supermarket boss has admitted.

John Allan, chairman of Tesco, said it was "entirely possible" that some suppliers are taking advantage of the situation to hike prices, adding to the cost of living crisis.

Allan made the comments under questioning from the BBC's Laura Kuenssberg, who referred to hikes in the price of products such as a tin of soup.

Asked if suppliers are "taking the mick", the Tesco chairman said: "I'm not sure I'd use those terms but I know that there have been very robust discussions between Tesco and a number of suppliers."

Tesco Non-executive chairman, John Allan poses for a photograph in London, Britain, April 12, 2017. REUTERS/Hannah McKay
Tesco chairman John Allan said it was "entirely possible" that some food companies are inflating their prices. (Reuters)

He said the supermarket chain hadn't stocked certain products including Heinz soup and tomato ketchup last summer due to disagreements over price increases and admitted that the company has "fallen out with other suppliers" over pricing.

"We have a team who can look at the composition of food, costs of commodities, and work out whether or not these cost increases are legitimate," he said.

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Asked if food companies are "taking advantage" of consumers at an already-difficult time, Allan replied: "I think that's entirely possible".

He said there had been "dramatic increases in commodity costs, energy costs and labour costs" and rising prices had seen people "trading down" from named brands to own brands and even budget options.

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He said: "It's something that our buying teams try to deal with every day of the week - sometimes we succeed in turning these things back, sometimes we don't.

"But until you can get into the cost structures of the people concerned it's very difficult to be definitive about it.

"The extent to which food prices have risen is uncomfortable and certainly the major supermarket chains - and I think Tesco is not alone in this - are trying very hard to mitigate those increases, not least by offering people alternatives."

Asked again if companies are taking advantage, he added: "They may well have."

While overall inflation is rising at 10.5%, food prices are up an eye-watering 16.8% in a year.

Price hikes include a 46% in the price of low-fat milk, while olive oil, sugar and cheese prices are all up a third or more, and the price of butter, pasta, flour, eggs and frozen vegetables have risen by a quarter.

According to Consumer group Which?, Tesco was sixth in the list of supermarkets with the highest price rises - behind Lidl and Aldi whose prices went up by the most in December.