Supermarkets tell MPs they can't cut prices any further

Shoppers will not see grocery bills come down in the near future as supermarkets say they are already doing all they can to cut prices, despite profits hitting record levels amid rampant food inflation.

Gordon Gafa, commercial director at Tesco (TSCO.L), told the Business and Trade committee of MPs that the UK’s biggest supermarket is the “most competitive we have ever been”.

Gaya added that despite his company's profits of £2.03bn ($2.58bn), up from £1.6bn in 2017/18, his company had made "7% less profit than the last financial year" and that it was important for the public to understand that.

While food inflation has eased slightly, the official measure remains above 18% and has been among price elements placing upwards pressure on the overall inflation rate.

Gafa highlighted Tesco's Aldi price match pledge — which mean 700 lines are price-matched to Aldi’s pricing, a low prices pledge covering 1,000 product lines — and 8,000 prices which are lower for Clubcard holders, as examples of the supermarket initiatives to help customers with the cost of living.

Sainsbury’s (SBRY.L) told MPs it is not passing all the costs of inflation in its supply chain to customers

Rhian Bartlett, food commercial director at Sainsbury’s, said the company is “acutely aware” of the impact of the cost of living squeeze on customers and its own staff.

Read more: Shops slash dairy and egg prices as focus turns to 'profiteering'

“We’ve spent £560m on keeping prices low, battling inflation and are doing absolutely everything we can to keep prices as low as possible for customers.

“In the most recent year we made lower profits, at £690m — input costs are not being fully passed through to our shelf prices.

“We are inflating behind our input costs and inflating wherever possible behind the market.”

Morrisons’ boss David Potts told MPs profits are down 10% in the last six months, which he attributes to price cuts that have put it close to Aldi and Lidl prices than ever before.

Potts said Morrisons’ efforts to help in the cost of living crisis include donating £4m to food banks, on top of £8m of products from its customers.

In the only glimmer of hope for shoppers struggling with the grocery bill, Potts told MPs that eggs and pork have seen particular sharp increases in price but he was “hopeful” shoppers would see these come down.

“Producers are starting to rebuild the flocks and are coming back across all the UK. I am hopeful that we will see a gradual normalising of the egg price.

“I will also mention pork, where an almost over-supply of pigs led to a reduction in the rearing of pigs just at a time when demand was going up,” he said.

Sainsbury's Bartlett said that wholesale prices have started to ease, leading to price cuts for milk, bread, butter and cheese.

Kris Comerford, chief commercial officer at Asda, told MPs the supermarket has invested in the food elements Just Essentials, Asda Rewards and Kids Eat For A Pound.

He also denied claims about Asda employees having to use food banks to pick up food from their own supermarket.

All four supermarket bosses told MPs they are real living wage employers. Potts said Morrisons pays at least £10.92 per hour to workers, ahead of the national living wage of £10.42, and gives staff a 15% discount at Morrisons stores.

Read more: Surging food prices impacting shoppers' mental health

Sue Davies, Which? Head of Food Policy, said: “Supermarkets have offered no new solutions to rising food prices despite having the power to help customers who are being hammered with wave after wave of soaring costs. Which? research shows how this is having a disastrous impact on people's mental and physical health, as well as on their finances.

“The Prime Minister was right to put the focus on supermarkets as he looks for ways to help with the cost of living crisis. The government must urgently get supermarkets to commit to stocking essential budget ranges in all their stores, as well as make pricing much clearer so shoppers can compare prices and find the best value products.”

The sector has scrambled this month to pass on some reductions in wholesale costs for essentials as the Competition and Markets Authority (CMA) investigates whether customers are paying over the odds. The regulator is due to report back next month.

Each of the supermarket representatives told the committee that they supported the prospect of a UK-wide "pump watch" transparency scheme, as currently used in Northern Ireland, to better inform drivers on wholesale petrol prices versus pump prices.

Meanwhile, a Bank of England policy chief said rising grocery prices have not been driven by “greedflation”.

Swati Dhingra, a member of the Monetary Policy Committee which sets interest rates, said energy and imported good were a “huge” part of inflation and Britain is not seeing “runaway profit inflation”.

Speaking at a Women in Economics event, Dhingra said food is where inflation remains most stubborn.

The rate-setter said companies are not passing on lower commodity prices and warned that wages are responding to inflation with a time lag.

Watch: France forces big food firms to cut prices

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