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Supermarket prices rise as cost pressures mount

Supermarket prices rose sharply in September as grocers cut in-store promotions amid increased cost pressures, a survey showed.
Like-for-like grocery prices rose at an annual rate of 1.3% in the four weeks to 5 September, picking up from 0.4% recorded in August, according to figures from Kantar.

Prices rose fastest for savoury snacks, cat food and cakes and pastries, more than offsetting declines for bacon, vegetables and cooking sauces. Kantar said the rise was caused by grocers slashing in-store discounts and switching to everyday low prices.

Supermarkets and their suppliers are facing rising cost pressures as commodity and delivery prices rise amid increased Brexit red tape and a shortage of delivery drivers that is pushing up wages. The British Retail Consortium has warned more price rises are on the way and consumer goods companies such as Unilever have said they will have to increase prices.

Fraser McKevitt, head of retail and consumer insight at Kantar, said: “For much of 2021 shoppers have been shielded from price increases, with more being sold on promotion this year compared to 2020. But in the past month only 27.5% of spending was done on deals. Other than the early days of lockdown last year, that is the lowest level recorded in 15 years.”

Prices are rising as shopping patterns shift with people returning to work and the new school year starting. Kantar said sales of ready meals were rising as home cooking fatigue set in and that there were fewer big online orders. People are moving back to stores and the average value of an online shop has fallen by £17 from its pandemic peak.

Year-on-year grocery sales fell 1.9% in the three months to September but are still 8.7% higher than before the pandemic. Food sales will face further pressure as people spend money in cafes when they return to work instead of making meals at home, Kantar predicted.

Waitrose and Tesco bucked the negative trend, recording sales increases of 2.2% and 0.2% respectively in the 12-week period. The biggest loser was the Co-op with a 5.6% drop followed by Morrisons where sales fell 4.9%. Ocado’s sales fell 1.5% but were still up 41.5% from two years earlier after online sales boomed during the crisis. Sainsbury’s sales fell 1.6% in the 12-week period from a year earlier.

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