Suggestions by the chairman of UK grocery giant Tesco that some food manufacturers might be using inflation as an excuse to hike prices further than necessary have been refuted by industry bodies.
Speaking on the BBC’s Sunday with Laura Kuenssberg TV programme yesterday (22 January), John Allan was asked whether he thought some food firms are “jacking up” prices and taking advantage of the poorest in society. He replied: “I think that is entirely possible.”
But responding, Minette Batters, president of the UK’s National Farmers’ Union (NFU), said she was “slightly baffled”, by Allan’s comments, saying “it was almost like he was living in a parallel universe”.
And Rod Addy, director general of Provision Trade Federation, accused the Tesco boss of “sabre-rattling”.
Allan told the programme Tesco – the UK’s largest food retailer – had “fallen out” with a number of suppliers after “robust” discussions over requests on prices the supermarket had challenged.
Referring to a high-profile spat with US food major Kraft Heinz over price increases last year, Allan said: “We didn’t have Heinz soup and Heinz tomato ketchup for a spell last summer after they tried to push through a large price increase at that stage. That was eventually settled.”
He added: “We do try very hard to challenge. We have a team who can look at the composition of food, the cost of commodities to work out whether these cost increases are legitimate.
“Sometimes we succeed in turning these things back and sometimes we don’t.”
But Allan suggested that most of the price increases are “legitimate”.
And he admitted “until you can get into the cost structures of the people concerned, it is very hard to be definitive about it”.
The NFU’s Batters told BBC radio today (23 January) farmers and growers are facing unprecedented hikes in production costs.
“We’re seeing a wholesale gas price that’s 650% higher than it was back in 2019 and the cost inflation on the back of that has been unprecedented and it has dwarfed any price increases to date,” she said.
And when Karen Betts, chief executive of the Food and Drink Federation, was asked on BBC Radio 4 today whether food firms were putting up prices beyond what was necessary, she said: “I don’t think that’s true at all.”
She added: “All food suppliers have seen a massive increase in their input costs over the last couple of years.
“Our suppliers know that they’ve got a huge responsibility to keep food affordable.”
Addy at Provision Trade Federation said: “Everyone is feeling the pressure of UK inflation. The cost of everything from raw ingredients, gas and electricity to packaging and distribution is soaring.
“Despite Mr Allan’s comments, producers are doing all they can to keep grocery bills low for shoppers – some costs have to be passed on or they will go bust. Mr Allan’s sabre-rattling, upping the squeeze on suppliers shows even Tesco is feeling the pinch, but hardly helps foster genial supplier relations. A climate of collaboration would be better, in which the whole supply chain recognises these extraordinary circumstances and works together for a common cause.”
It was revealed last week UK grocery prices rose for a seventeenth consecutive month in December, damping optimism that headline inflation hit a peak last year.
Food and non-alcoholic beverages prices increased 16.9% in the 12 months to December, the fastest annualised gain since 1977, the Office for National Statistics (ONS) announced.