- Written by Tom Espiner & Ashley Swan
- bbc news
Manufacturers of some popular food brands have increased prices above cost over the past two years, according to Britain’s competition watchdog.
This is driving up the prices shoppers pay for baby formula, baked beans and pet food, the Competition and Markets Authority (CMA) said.
About three-quarters of branded suppliers make more money on individual products.
But food companies said they had done everything they could to absorb the higher costs.
The findings are part of a price analysis of 10 categories including milk, chicken, mayonnaise, baked beans, chilled desserts, instant meals and lemonade.
The CMA said the rise in food prices is mainly driven by rising costs of energy and fertilizers.
However, it added that manufacturers of most branded food products in the 10 categories set prices above cost, “thereby contributing to higher food price inflation.”
As a result, shoppers are increasingly turning to private label products, meaning branded products are losing market share and actually reducing overall revenue.
market concerns
But when it comes to infant formula, there aren’t many alternatives, and prices have risen by a quarter in the past two years. The profits on these products are high.
The CMA added that new parents could save up to £500 on formula in the first year of life by shopping around.
Even cheap baby formula needs to follow regulations to provide infants with the nutrients they need, the magazine said.
But the market is dominated by two large companies, Danone and Nestlé, and there is little evidence that parents will switch to cheaper alternatives.
Sarah Cardell, CEO of CMA, said: “Parents don’t always have the right information to make informed choices, and suppliers don’t always offer infant formula at competitive prices. “We are concerned that they may not have a strong incentive to provide this.”
He added that food prices were rising by more than 10% in October, “putting a huge strain on household budgets.”
Nutritionist and author Pauline Cox said the rules in the UK are so strict that there is “very little difference” between branded and unbranded baby products in terms of their nutritional value for babies. .
But if parents have concerns about what type of formula is right for their baby, she said they should talk to their doctor.
Gemma Maxwell, 31, from Glasgow, is mum to three-year-old Finlay and a new baby.
She said: “I had seen people using big brands before, so I thought it could be more beneficial for the baby.”
New parents may be hesitant to shop around for branded products because lesser-known products aren’t as widely available, she says.
But Maxwell said she has friends who use cheaper formula brands.
“When I looked at the nutritional values of both formulas, they were the same,” she said.
She said she is trying to shop around for different prescriptions, especially in the current cost of living crisis.
But Diane Phillips, 30, from Coldon Row, Staffordshire, said she would probably stick with the big brands.
“I feel most comfortable choosing a more reputable brand,” she says, adding that brand definitely plays a role in choosing the right formula.
But she said she would consider other, lesser-known brands if she was sure the nutritional value was the same.
Industry body the British Retail Consortium says families can “save significant savings by switching to cheaper brands or own-label products, all of which provide the nutrition a healthy baby needs”. said.
price increase
Danone, which makes Aptamil and Cow & Gate, accounts for more than 70% of the UK infant formula market.
“We have worked hard to absorb the significant cost increases we faced, save money and minimize price increases” during a period of high inflation.
A spokesperson said Danone sells “a range of baby formula products at a range of price points” and is “launching new formats that are bigger and better value” and that “the baby formula market is competitive”. added.
The company said it “will continue to engage with CMA over the coming months.”
Nestlé, which controls 14% of the market with SMA and Little Steps, said it welcomed the CMA’s review of the industry.
A Nestlé spokesperson said: “This is a complex and serious issue and we are open to any constructive dialogue to support parents in the most effective way possible.”
“We strive to reduce costs wherever possible and only raise prices as a last resort.”
Industry group the Food and Beverage Federation said manufacturers absorbed the costs to protect consumers from higher prices.
“However, with inflation reaching a 40-year high earlier this year, some price increases are inevitable,” CEO Karen Betts said.
The watchdog will further investigate the powdered milk market and also look into supermarket loyalty card systems.
Some supermarkets are offering lower prices to customers only through loyalty card schemes, a practice the watchdog plans to investigate in 2024.
In September, consumer group “Which?” supermarkets Tesco and Sainsbury’s are raising the prices of daily necessities, making the discounts for point card holders appear larger than they actually are, so the point card system is no longer viable. I warned you that it’s not as good as it seems.
However, both supermarkets rejected the claims.