Consumers in the UK are enjoying “a golden period” of cheap groceries, says supermarket consultant Fraser McKevitt, with fierce competition between rival supermarket groups pushing down prices and profits.
A price war in food was started by German groups Aldi and Lidl, which have together taken hold of more than 10% of the UK’s total grocery market, up from around 2% in 2011.
The added competition has led to fierce discounting among larger supermarket groups, hitting shares in Tesco, Morrisons and Sainsbury’s, which recently forked out £1.4bn for Argos owner Home Retail. Sainsbury’s reported a 14% drop in underlying profit this week to £587m, as the competition continues to bite.
Despite an expansion drive in clothing, total group sales across its 601 supermarkets declined by 1.1% to £25.8bn, leading to an 8% cut to the full-year dividend.
In an effort to “remain competitive”, Sainsbury’s has lowered prices on 1,900 products in the last year, it said. Government inflation measures are running at 0.5% to 1.1%, but food prices have now fallen every month since September 2014, according to supermarket monitor Kantar.
“Prices are actually 4% lower, would you believe,” Sainsbury’s chief executive, Mike Coupe, told the BBC. His pay has been increased.