Grocery inflation slowed as supermarket discounts deepened
Grocery inflation in January slowed for the first time in six months after supermarkets lowered prices in response to stretched household budgets.
Inflation was 3.3 per cent in January, easing from 3.7 per cent in December, according to the latest figures from Kantar.
Prices rose for chocolate, juices and butters, but fell for cooking sauces, toilet paper and cat food.
“Supermarkets were dishing out the discounts this New Year, and consumers responded,” Fraser McKevitt, head of retail and consumer insight at Kantar, said.
Spending on promotions rose year-on-year by £274 million, accounting for 27.2 per cent of sales – the highest level in January since 2021.
Grocery prices have inflated every month since last August, but the rate of growth remains far below the double-digit figures seen during the cost-of-living crisis.
However, recent forecasts from the British Retail Consortium (BRC) have suggested that food prices will rise by an average of 4.2 per cent in the second half of this year, although this is far above other analysts’ estimates.
The lobby group has attributed this rise to £7bn in extra costs announced in the Budget due to a higher minimum wage, higher wage taxes, and a packaging tax aimed to reduce plastic waste.
The headline rate of inflation fell to 2.5 per cent in December, below analysts’ estimates of 2.5 per cent. Services inflation fell to 4.4 per cent, its lowest level since March 2022.
Tesco market share rises again
Tesco’s market share rose to 28.5 per cent in the 12 weeks to January 26, from 27.8 per cent last year, the highest market share the grocer has enjoyed since 2016. Total spend at the grocer rose topped £10.5bn.
Asda’s market share, meanwhile, continued to drop. Its share of the market fell to 12.6 per cent from 13.6 per cent last year, putting it ever-closer to fourth-place supermarket Aldi.
Ocado was the fastest-growing grocer for the ninth consecutive month. Spending at the online retailer grew by 11.3 per cent, taking its share to 1.9 per cent of the market.
Joint owner of Ocado Retail, M&S, also saw a strong 12 week period of growth with grocery sales increasing by 10.5 per cent in its brick-and-mortar stores, Kantar said.
