Baby formula, baked beans and mayo suppliers have contributed to higher inflation, says CMA

The Competition and Markets Authority (CMA) has said that while rising input costs have contributed to higher food prices, suppliers of some retail products have also added to rising inflation.

The competition watchdog said that around 75 per cent of branded suppliers of products such as baby formula, baked beans, mayonnaise and pet food have increased their unit profitability and, in doing so, have contributed to higher food price inflation.

The organisation says that prices of baby formula have risen by 25 per cent over the past two years, estimating that parents could save around £500 during the first year of a baby’s life by switching to a cheaper option.

However, the competition regulator is concerned that parents may not have the right information at the right time to make effective choices.

It explained that the baby formula market is highly concentrated, with two firms holding 85 per cent of the market share, warning that suppliers may not have the right incentives to offer their products at competitive prices.

A review by the watchdog also revealed that shoppers have switched to cheaper own brand products to cope with high levels of food inflation which hit 10.1 per cent last month.

The CMA says that many branded suppliers have pushed up prices by more than their increased costs leading customers to seek out cheaper alternatives.

The organisation analysed ten product categories to assess competition across the supply chain and found shoppers had switched to cheaper products in nine of them.

The CMA added that it has seen a rise in some supermarkets offering discounted products for loyalty card holders and it plans to review the situation in early 2024.

“Food price inflation has put huge strain on household budgets, so it is vital competition issues aren’t adding to the problem,” said Sarah Cardell, chief executive of the CMA. “While in most cases the leading brands have raised prices more than their own cost increases, own label products are generally providing cheaper alternatives.”

She added: “We have also seen an increase in the use of loyalty scheme pricing by supermarkets, which means that price promotions are only available to people who sign up for loyalty cards. This raises a number of questions about the impact of loyalty scheme pricing on consumers and competition and the CMA will launch a review in January 2024.”

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