Food brands may be profiteering from price hikes

Consumers have felt the pinch from higher food prices as inflation soars.

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As inflation continues to push up grocery bills, supermarket chain Tesco has warned that some food producers may be taking advantage of the situation by raising prices more than necessary.

The chairman of Tesco, one of Britain’s largest supermarket chains, said on Sunday that it was “entirely possible” that some food companies are profiting from price inflation at the expense of some of the poorest consumers.

John Allan told the BBC that Tesco had “fallen out” with “a number of suppliers,” following the dispute over price increases which the supermarket challenged.

Tesco has created a team to monitor food input costs against price increases and challenges companies it believes are raising prices disproportionately, Allen said.

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“We have a team that can look at the composition of food, the cost of goods, and determine whether or not these price increases are legitimate,” he said the program “Sunday with Laura Kuenssberg”.

Allan said that, while most price increases were legitimate, the supermarket was “trying hard to challenge” those it deemed not.

Tesco told CNBC that it could not provide further comment.

Food suppliers have hit back at their claims. Heinz beans and tomato ketchup were among products that Tesco temporarily pulled from shelves last year in a price dispute. The products were returned to sale after an agreement was reached.

A Kraft Heinz spokesperson told CNBC Monday that the company continues to face rising production costs and rising inflation, but is “absorbing costs” where possible.

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Spend the money

A group of consumers called Who? said it was possible that supermarkets such as Tesco passed the money on claims that suppliers had raised prices unfairly.

In its latest Supermarket Inflation Tracker, Which? found that branded items had a lower inflation rate than that of supermarket own-label items. In the three months to December 2022, prices for store own-label items rose 18.3% year-over-year, compared with a 12.3% year-over-year increase for branded items.

“We have seen large price increases in the supermarket and our research shows that despite more people choosing own brands and basic products to help them with the cost of living, these chains have been subject to higher rates of inflation than premium and brands. food,” Reena Sewraz, Who? retail editor, told CNBC.

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It comes as consumers continue to face higher prices, as a result of supply chain disruption and Russia’s war in Ukraine.

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UK inflation dipped slightly to 10.5% in December from 10.7% in November, but remained at a 40-year-high.

The price of food and non-alcoholic beverages rose 16.9% in the year to November 2022, new data showed Wednesday.

These price increases have prompted more shoppers to opt for branded items from supermarkets and discount chains, such as Lidl and Aldi.

Discount stores are not immune to recent price increases. While remaining among the UK’s best grocery markets, prices at Lidl and Aldi respectively rose 21.1% and 20.8% in the year to December, according to Which?.

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