The worsening cost of living crisis has focused attention on the cost of the weekly shop. Households already grappling with rising energy bills, petrol prices, tax, mortgage payments and rent can also expect to pay more for groceries this year.
At the weekend, the chair of the UK’s biggest supermarket chain, Tesco, warned “the worst is yet to come” for food price inflation, forecasting it would soon hit 5%.
Supermarkets are managing their own inflationary pressures, facing soaring bills for basic commodities, from coffee beans to milk and wheat, alongside rising packaging, transport, energy and staff costs.
Yet in the fiercely competitive UK grocery sector, if they do not do all they can to keep a lid on price rises, they risk losing customers to rivals, including the fast-growing discounters Aldi and Lidl.
So what kind of ammunition do supermarkets have to fight this price war, and what are they doing to limit increases on popular items while protecting profits?
Payroll costs are in the spotlight. Brexit and the pandemic have disrupted the UK employment market, forcing retailers to offer wage incentives to fill vacancies. The legal minimum wage for those aged 23 or older also rises 6.6% to £9.50 in April.
Tesco announced more than 1,600 job cuts last week, cutting back on night shifts and closing more deli and meat counters to concentrate staff on other, more profitable, shopfloor jobs. Sainsbury’s and Asda have also cut back on fresh food counters.
Management roles, which like night shifts offer higher wages, are also being axed, along with staff benefits such as paid breaks and extra pay for Sundays or bank holidays.
Other tactics to reduce staff costs include more automation, with self-service checkouts extended to shoppers
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