Bosses at the UK’s leading supermarkets have denied accusations of profiteering as food and fuel prices rise during the cost-of-living crisis.
Speaking with MPs from the Business and Trade Committee today (27 June), Tesco commercial director Gordon Gafa said the supermarket is the “most competitive we have ever been.”
“We have not made more profit year-on-year, we have actually made 7% less profit versus our last financial year. It’s important to be clear at the outset on that point.”
He said that Tesco’s margin has sat between 3% and 4% over the past four or five years with profit year-on-year down, while the retailer lifted wages by 15% over the past year.
Morrisons chief executive Dave Potts said that the supermarket is “acutely aware of the pressure many millions of people have come under” and said that it is “as close now as we have ever been to Aldi and Lidl prices”.
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Sainsbury’s food commercial director Rhian Bartlett insisted that Sainsbury’s is not passing on the full impact of rising costs to consumers, however, Chair of the House of Commons Business and Trade Select Committee, Darren Jones MP.
Bartlett also pointed out that Sainsbury’s profit margins were even slimmer than Tesco’s.
“We make less than 3p in the pound. We’ve also seen profits step back,” she said.
Bartlett said that labour costs, energy costs and rising commodity costs have hiked up food inflation, but added: “We are inflating behind our input costs, and we are inflating – wherever possible – behind the market.”
Asda chief commercial officer Kris Comerford also pointed to the fact that its EBITDA profits fell 25%.
Jones also questioned the supermarket over its increased cost of borrowing from £66m in 2018 to 2019 to almost £500bn in 2021 to 2022 as a result of Asda’s takeover of EG Group.
Comerford said the change in ownership had been “factored in” to Asda’s strategy and that it is “investing in the customer offer.”
Following the launch of an investigation by the Competition and Markets Authority (CMA) last month, supermarket giants were met with allegations that some had increased fuel prices and exploited market conditions.
The CMA explained that the average 2022 supermarket pump prices were around 5p per litre more expensive than they would have been had their average percentage margins remained at 2019 levels.
Evidence also showed at least one supermarket has significantly increased its internal forward-looking margin targets over the period and as a result, others may have adjusted their pricing behaviour accordingly.
Questioned over this today, Gafa said the CMA’s evidence that fuel retailers’ profit margins have risen in recent years is “representative” of what Tesco has seen, while Potts agrees that there is more profit than before.
The retailers welcomed an open data platform for fuel prices to give motorists full transparency into pricing.
Gafa said that Tesco would be “happy to submit data to an app or website”, while Bartlett said Sainsbury’s would be “very supportive”.