Skyrocketing Grocery Prices Reach Record Heights After Twelve Months
Rising Grocery Prices Push Inflation to 4.1% in May, Led by Chocolate and Suncare Products
A record-breaking hot start to May has contributed to a steep increase in grocery inflation, reaching 4.1% in May, according to Kantar. This follows a 3.8% jump in April and a 1.8% rise in March.
Fraser McKevitt, head of retail and consumer insight at Kantar, stated, "This latest jump in grocery price inflation signals new terrain for 2025. Households have been adapting their shopping habits to manage expenses for some time, but we tend to see behavioral changes when inflation surpasses the 3-4% threshold as people become more aware of its impact on their wallets."
The British Retail Consortium (BRC) similarly reported an increase in food prices earlier this week. Throwback to fresh food items like steak has been particularly noticeable, due to a rise in wholesale prices. The BRC issued a warning about future price hikes, citing a new packaging tax and increased employer's National Insurance contributions (NICs) as additional burdens on retailers.
On a brighter note, Ocado has spent a full year as the fastest-growing British grocer, with a 14.9% increase in sales over the past three months. Discounters also enjoyed a strong beginning to the year, reporting an 8.4% growth–their highest since January 2024. Lidl welcomes the most new shoppers, with a 419,000-strong increase from the previous year, reported by Kantar.
Tesco remains the UK's largest grocer, boosting sales to £9.38 billion (up 5.9%) and holding 28% of the market share. Asda has had its best three-month performance since May 2024, with a 12.1% growth in share prices, under the leadership of returning chair Allan Leighton. Leighton is keen on driving down prices to compete with established players like Tesco, Sainsbury's, Morrisons, and discounters.
The steep rise in grocery inflation, reaching 4.1% in May, could potentially influence consumers' insurance premiums due to the financial burden on households. As people adapt their shopping habits to manage expenses, they might consider cutting non-essential purchases, such as luxury food-and-drink items, or reducing home-and-garden expenses. To counterbalance rising costs, businesses might need to reconsider their strategies, particularly in the retail and food sectors. For instance, retailers could explore ways to implement more cost-effective packaging, thus reducing the impact of the new packaging tax. Similarly, shopping behaviors might shift towards online grocery shopping, like Ocado and discounters, to benefit from lower prices and convenience.
