UK grocery price inflation surges to record 16.7% - Kantar

© Reuters. FILE PHOTO: A employee arranges produce inside a Sainsbury?s supermarket in Richmond, west London, Britain, June 27, 2022. Picture taken June 27, 2022. REUTERS/Henry Nicholls/File Photo

By James Davey

LONDON (Reuters) - British grocery inflation hit a record 16.7% in the four weeks to Jan. 22, dealing another blow to consumers battling an escalating cost-of-living crisis, industry data showed on Tuesday.

Market researcher Kantar said grocery inflation was at its highest since it started tracking the figure in 2008, with prices rising fastest for essential products such as milk, butter, cheese, eggs, dog food and toilet rolls.

It said UK households now face an additional 788 pounds ($974) on their annual shopping bills if they don't change their behaviour to cut costs.

"Late last year, we saw the rate of grocery price inflation dip slightly, but that small sign of relief for consumers has been short-lived," Fraser McKevitt, Kantar's head of retail and consumer insight said, noting the figure jumped a "staggering" 2.3 percentage points from December's reading.

After a tough 2022, British consumers are facing an even tighter squeeze on their finances this year as the government cuts back support on household energy bills and mortgage rates rise.

The Bank of England is expected to raise its main interest rate by half a percentage point to 4% on Thursday.

Earlier this month, Ken Murphy, chief executive of market leader Tesco (LON:TSCO), said grocery inflation may not have peaked but was hopeful it would by the middle of the year.

Official data published this month showed overall consumer price inflation fell to 10.5% in December. The Bank of England expects it to fall to around 5% by the end of 2023 as energy prices stabilise.

Kantar said sales of supermarkets' own-label lines grew 9.3% in January, while sales of branded products, which are generally more expensive, were up by just 1%.

Supermarket chains Tesco, Sainsbury's and Morrisons have said inflation for their customers is less than Kantar's headline number as they dial-out some of the hit through trading down to cheaper items.

With supermarkets focusing on price matching schemes and leveraging their loyalty programmes, the proportion of spending on promotions dropped to its lowest level since at least 2008, Kantar noted.

It said that over the 12 weeks to Jan. 22, UK grocery sales rose 7.6% year-on-year, masking a drop in volumes when accounting for inflation.

German-owned discounters Aldi and Lidl were again the fastest growing grocers, partly due to new store openings, with sales up 26.9% and 24.1%, respectively.

Sainsbury's sales were up 6.1%, while sales at Tesco and Asda were both up 6%.

Although Morrisons was again the laggard, with sales down 1.9%, its performance continued to improve.

Shares in Tesco were down 0.3% in morning trading, while Sainsbury's was down 1.2%.

UK grocers' market share and sales growth (%)

Market share Market share % change in

12 wks to 12 wks to sales

Jan. 22 2023 Jan. 23 2022 (yr-on-yr)

Tesco 27.5 27.9 6.0

Sainsbury's 15.4 15.6 6.1

Asda 14.2 14.4 6.0

Aldi 9.2 7.8 26.9

Morrisons 9.1 9.9 -1.9

Lidl 7.1 6.2 24.1

Co-operative 5.5 5.7 3.7

Waitrose 4.7 5.1 -0.6

Iceland 2.5 2.4 10.6

Ocado (LON:OCDO) 1.8 1.8 7.6

Source: Kantar

($1 = 0.8093 pounds)