The British Retail Consortium (BRC) has responded to a report by the Competition and Markets Authority (CMA) on competition in the UK groceries sector.

The sector is forecast to be worth £185.7bn in 2023, up 8.0% on the previous year.

Following an assessment, the CMA has found that some branded suppliers have pushed up prices by more than their costs increased. However, in most cases, shoppers can find cheaper alternatives with own-label products, which the CMA believes is “positive for competition”.

BRC director of food and sustainability Andrew Opie commented: “The increased availability of own-label products is just one way in which food retailers have supported their customers with the rising cost of living.”

The CMA has reportedly heard from leading brands that they are aiming to use any future reductions in their input costs to offer customers more promotions, rather than cut the standard price they charge supermarkets for their products.

The stakes are high for grocery retailers in the UK. Earlier this year, the CMA fined supermarket giant Asda for failing to provide relevant information for its fuel pricing probe.

CMA’s concerns over baby formula and loyalty schemes

The research highlights a lack of competition in the baby formula market, which is dominated by two brands. Additionally, prices for baby formula in the UK have risen by 25% over the past two years.

According to the CMA, there is little evidence of parents switching to cheaper branded options as prices have risen and very limited availability of own-brand alternatives.

The CMA has stated it will work to better understand consumer behaviour (including what influences choice) and barriers to entry and expansion for baby formula manufacturers and consider whether any changes to the regulatory framework could help the market work better. An update will be published in 2024.

Also in 2024, the CMA plans to launch a review of loyalty scheme pricing by supermarkets, considering its impact on consumers and competition in the grocery sector.

Opie confirmed that retailers understand the need to demonstrate value to consumers, but “this continues to be challenged by rising costs, from hundreds of millions in additional business rates, to higher labour costs from the rising NLW [National Living Wage]. “