British supermarket executives rejected allegations they were profiteering through a cost of living crisis on Tuesday, telling lawmakers they were not passing on price pressures in full to prevent customers from going elsewhere.
Soaring food inflation has contributed to the biggest squeeze on living standards in Britain since records began in the 1950s, and has prompted questions about who is responsible for record jumps in grocery bills.
Similar pressures across Europe have prompted governments in France and Hungary to impose price caps on some essentials, but executives from market leader Tesco TSCO.L, Sainsbury’s SBRY.L, Asda and Morrisons told parliament that was not needed in Britain.
“This is fiercely competitive as a market,” Sainsbury’s food commercial director Rhian Bartlett told lawmakers on the lower house of parliament’s business and trade committee.
“We’re generally considered one of the most competitive food markets in the world. I’m not sure what price caps would add to that process, other than bureaucracy.”
British food prices started rising well over a year ago, as Russia’s invasion of Ukraine compounded pandemic-related tensions in the supply chain. Food and drink inflation was running at 18.3% in May, according to official data.
Sainsbury’s Bartlett said it had held back from passing on all the pricing pressures it faces: “we are inflating behind our input costs, and we’re inflating wherever possible behind the market.”
The retail executives said on top of higher energy costs they were also having to juggle rising wage bills, commodities and logistics costs. At the same time they face fierce competition from the German discount groups Aldi and Lidi which have driven prices down in Britain in the last decade.
The industry has warned there is also a lag between a drop in wholesale and retail prices. Despite that, the cost of some goods are starting to fall, such as milk, bread, pasta and oil.
Asked by one lawmaker about “a grotesque display of profiteering”, Tesco’s TSCO.L commercial director Gordon Gafa said the group made 4 pence profit for every pound spent, while Sainsbury’s Bartlett said it made less than 3 pence on the same measure, with both executives arguing that did not represent a high profit margin.
The industry points out that major consumer goods firms such as Unilever ULVR.L and Nestle NESN.S have profit margins of 16 to 17%.
Tesco, Britain’s biggest retailer, has predicted it will have broadly flat retail adjusted operating profit this year.
Bank of England policymaker Swati Dhingra also said there was little evidence of companies failing to pass on lower prices so far, when she looked at their most recent annual earnings reports.
“It’s not very convincing to argue – at least as of yet – that grocery inflation is driven by ‘greedflation’,” she said.