Apr 7, 2022
Supermarkets braced for a cost of living bunfight
Consumers are primed to expect price rises, and supermarkets have in the past been successful at passing them on. The big four of Tesco, Sainsbury's, Asda and Wm Morrison insist they have learnt the lessons of the financial crash, when they passed on price rises, maintained margins - and permanently ceded market share to discounters Aldi and Lidl, which went from bit-players to the driving force of the UK grocery market. Debt burdens assumed in their private equity buyouts over the past two years may constrain both retailers even if Asda last week reported annual profits for 2021 of £1bn. Higher petrol prices - and fuel margins - will cushion only some of the blow. Discounts offered through its Clubcard Prices loyalty scheme already make it the cheapest of the bunch, but more than anyone else it can afford to swallow inflationary cost increases in an effort to capture extra customers. Investment in narrow value ranges is one thing, but a resurgent Tesco could apply pressure to hold back prices far more broadly.
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