Price war

The grocery price war and the outlook for 2017

In this IRI Big Question report Tim Eales and Martin Wood examine the trends in grocery food pricing, the price war and the outlook for 2017.

The impact of Brexit has been closely monitored since the referendum result in June 2016:

  • UK general inflation is at its highest since July 2014 (CPI).
  • Fuel costs have increased by almost 20% (AA).
  • The cost of commodities such as butter and tea have increased by 9% and 5% respectively (IRI).

Despite these increasing cost pressures, we continue to see retailers invest in the on-going price war.

So far, it is the shoppers that have been winning as a result of these price wars, grocery prices fell every month from February 2014 until February 2016, and stabilised throughout 2016. After years of these declining grocery prices we are now beginning to see prices rise. The impact of Brexit is usually the first to blame, but here we can explain the real causes of the price inflation:

  • Within own label, retailers are increasing (everyday) base prices and average prices.
  • Within brands, (everyday) base prices are still not increasing, but average prices are increasing because there is less promoting and the level of deal depth is falling (this is new – but we did see early signs of this last year).
  • There is also great variation between categories.

March will be a pivotal month for the price war as some of these increases start becoming evident in-store and the price basket begins to rise.

 

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Price war infographic

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