Market in crisis: how to survive the increase in food prices!
In the realm of the British market, manufacturers of renowned food brands have raised prices beyond their costs in the past two years, directly impacting consumers. According to the UK Competition and Markets Authority (CMA), such increases have affected products such as infant milk, canned beans, and pet food, contributing to the rise in retail prices.
Approximately three-quarters of brand product suppliers have seen profit increases on individual items. As reported by the BBC, food companies claim to have done everything possible to absorb rising costs. This scenario emerged from an analysis of prices in ten categories, including milk, poultry, mayonnaise, chilled desserts, ready meals, and lemonade.
High inflation in food prices has been primarily driven by rising energy and fertilizer costs. However, producers of most branded food items in the ten categories have raised prices beyond their costs, thereby contributing to the inflationary pressure on food prices.
As a result, consumers are increasingly shifting towards private label products, causing a loss of market share for branded goods and an overall reduction in their profits.
Regarding infant milk, in particular, there are not many alternatives available, and prices have increased by a quarter in the past two years. Profits on these products have been high. New parents could save significantly, around £500 in a child’s first year, by purchasing less expensive infant milk.
However, the market is dominated by two major players – Danone and Nestlé – and there is not much evidence that parents are switching to cheaper alternatives. Despite the UK’s strict rules on infant nutrition, there is not much difference in nutritional value between branded and non-branded products. However, parents who have doubts about the type of formula suitable for their child are advised to consult a doctor.
Danone, which holds over 70% of the British infant milk market with its Aptamil and Cow & Gate brands, claims to have worked hard to absorb significant cost increases and minimize price hikes. Nestlé, with a 14% market share with SMA and Little Steps, has welcomed the CMA’s industry review.
The industry group Food and Drink Federation has emphasized that manufacturers have absorbed costs in an effort to shield consumers from higher prices. However, with inflation reaching its highest peak in 40 years, some price increases have been inevitable.
The CMA is set to embark on a more extensive investigation into the infant milk market, aiming to delve deeper into its dynamics and assess various facets of this industry. Furthermore, the regulatory body will expand its scope to include an in-depth examination of supermarket loyalty card programs. It has come to the attention of the watchdog that specific supermarkets have implemented a pricing strategy where reduced prices are exclusively accessible to customers who possess loyalty cards. This particular practice will be subjected to a rigorous evaluation and analysis in the year 2024, as part of the ongoing efforts to ensure fair competition and consumer protection within the retail sector.