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There is FINALLY a food price drop!

Vicky Parry 3rd Oct 2023 No Comments

Reading Time: 3 minutes

Food price drop. These last few years have been exhausting. There is so little left of a paycheque, post-bills, and our supermarket shop has been a real hike. Even the budget stores have seen a climb in prices and our basic shop has tripled.

It comes as a real relief to see that the prices are finally dropping. British Retail Consortium shop price index has shown this week that food prices have in fact lowered for the first time in two years: prices in September were down 0.1% from the previous month.

Prices of dairy goods, margarine, fish and vegetables – which are often own-brand lines – all saw falls, it said.

Grocery inflation – the annual rate at which food prices are rising – remains high but is starting to ease.

Why has this drop happened?

Chief executive Helen Dickinson said this came as a result of “fierce competition between retailers”, and brought year-on-year food inflation down to single digits at 9.9%.

This is below the three month average rate of 11.4% and is the fifth consecutive deceleration in the food category, with inflation at its lowest since August 2022.

Danni Hewson, head of financial analysis at AJ Bell, adds that healthy competition from supermarkets has in fact saved us:

“Competition for our patronage has been fierce amongst supermarkets with the discounters spotting and exploiting shoppers’ desire for the best value. Their push for dominance in the UK was somewhat curtailed by the pandemic when worried households were prepared to pay for contact-free deliveries – a service neither Aldi nor Lidl provided.

“But raging inflation has hit households where it hurts. Parents have struggled to put enough food on the table to fill up their growing kids and news websites have been full of tales of people forced to choose between heating and eating. Shoppers have become ultra-savvy, scouring social media for the best deals and signing up to supermarket loyalty schemes that offered discounts.”

Who dominates the budget food market?

Aldi has been named the cheapest supermarket in the UK in Which Magazine for 15 consecutive months.

Hewson says: “Both Aldi and Lidl stole market share and, with battle lines drawn, millions of pounds have been spent by all players to cut prices on selected items. For inflation-weary shoppers the headline will bring a sigh of relief, but a fall of 0.1% month on month is tiny and it’s important to remember that if we compare prices today with where they were a year ago, things look very different.

“Prices are 9.9% higher than they were last September and whilst the BRC expects inflation to keep cooling there are still a number of issues to consider.

There have been allegations of profiteering strongly denied by supermarkets and discounted by the competitions watchdog.

Will a food price drop continue?

The good news is … it looks that way.

NielsenIQ head of retailer and business insight, Mike Watkins, said: “With further price cuts by supermarkets in recent weeks, food inflation continues to slow which is good news. However there continues to be pressure on budgets with over half of households still feeling that they are significantly impacted by the continued increases in cost of living.

“It will be important for retail sales to keep momentum which means we can expect more price cuts and increased promotional activity across all retail channels.”