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Food brands can profit from rising prices

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Consumers have been feeling the pinch due to higher food prices as inflation rises.

Nathan Stirk | Getty Images News | Getty Images

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

The chairman of Tesco, one of Britain’s biggest supermarket chains, said on Sunday that it was “entirely possible” that some food firms were cashing in on 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” after discussing a price increase which the supermarket disputed.

Tesco has set up a team to monitor food costs against rising prices and challenges companies it believes are raising prices disproportionately, Allen said.

“We have a team that can look at the composition of the food, the cost of the items and see if the price increase is legitimate,” he said on “Sunday with Laura Kuensberg.”

Alan said that while most of the price increases were legitimate, the supermarket “went out of its way to challenge” those it believed were invalid.

Tesco told CNBC it could not comment further.

Food suppliers responded to the claims. Heinz beans and tomato ketchup were among the products Tesco temporarily pulled from its shelves last year following a pricing row. Products returned for sale after reaching an agreement.

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

Transfer responsibility

A consumer group called Which? said it was possible that supermarkets such as Tesco were passing on responsibility for suppliers unfairly raising prices.

In its latest supermarket inflation tracker, What? found that branded products had lower inflation rates than supermarket own-label products. In the three months to December 2022, store prices for own-label goods rose 18.3% year-on-year, compared with a 12.3% year-on-year increase for branded goods.

“We are seeing a huge increase in prices in the supermarket. Our research has shown that while more people are opting for own brands and mainstream products to help them cope with the cost of living, these ranges have been subject to higher inflation rates than premium and branded products. products,” Rina Suraz, Which? retail editor, told CNBC.

It comes as consumers continue to face price hikes as a result of supply chain disruptions and Russia’s war in Ukraine.

Inflation in the UK eased slightly to 10.5% in December from 10.7% in November, but remains at a 40-year high.

Food and soft drink prices rose 16.9% in the year to November 2022, new data showed on Wednesday.

These price increases have encouraged more shoppers to choose supermarket brands discount chains such as Lidl and Aldi.

Discount supermarkets are not immune to recent price rises. Despite remaining among the UK’s cheapest supermarkets, prices at Lidl and Aldi rose by 21.1% and 20.8% respectively in the year to December, according to Which?.

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