Britain’s third-largest supermarket group ASDA has frozen the prices of over 500 products until the end of August, adding to signs that a surge in food inflation is set to decrease and even reverse in the coming months. The price freeze, which includes branded and own-label products, covers cupboard essentials such as cereals, pasta, tea, and summer lines, including salads, burgers, and ice cream. The move comes as several retailers cut or frozen prices to keep up with rising household bills.
ASDA’s branded and own-brand products comprise the retailer’s overall sales. The supermarket chain trails market leader Tesco (TSCO.L) and No. 2 Sainsbury’s (SBRY.L). ASDA’s price freeze includes branded products such as Kellogg’s (K.N.) cornflakes and Premier Foods’ (PFD.L) Oxo beef stock cubes and own-brand products such as eggs and noodles.
The retailer has also launched a loyalty program and money-saving advice site to help shoppers cope with the cost of living crisis. It is raising the minimum wage for new staff from April and cutting the price of petrol and diesel. It is also rolling out a new value range that will contain thousands of items at PS1 or less. The retailer will offer 100 lines for just 40p and another PS1,000 lines at a low price of PS2 and under.
According to research firm Kantar, supermarkets’ share of the U.K. grocery market has dropped over the past year. The loss of market share has mainly been due to the success of discounters such as Lidl (LID.L) and Aldi (ALDI.L). The prices of these discounters are below those of the big four major supermarket chains.
Inflation is hurting people’s lives, especially those who are the lowest paid, said Sue Davies, head of consumer policy at the charity Which? She added that shoppers would switch if they needed to get value for money at their existing supermarket of choice. This will be good news for the discounters but could hurt the more prominent names.
Retailers hope the recent dip in oil prices and supply chain disruption caused by coronavirus lockdowns will tame food inflation. However, analysts still expect higher energy, labor, and packaging costs, which factor in the ongoing rise in grocers’ product prices.
Some analysts, such as Shore Capital analyst Clive Black, expect deflation rather than hyperinflation to be the key trend in 2023. Lower commodity and energy prices will help this, but he said it may take a while for grocers to recover their costs.
The price cuts by ASDA and Morrisons are just the latest moves to ease the pressure on households, which soaring fuel and transport costs, a strong pound, and higher wages have squeezed. Inflation has pushed many families to limit their spending or skip meals, and some are turning to online grocery delivery services and cashback apps to save money on everyday goods.
