A golden age for shoppers

Consumers in the UK are enjoying “a golden period” of cheap groceries, says supermarket consultant Fraser McKevitt, with fierce competition between rival supermarket groups pushing down prices and profits.

A price war in food was started by German groups Aldi and Lidl, which have together taken hold of more than 10% of the UK’s total grocery market, up from around 2% in 2011.

The added competition has led to fierce discounting among larger supermarket groups, hitting shares in Tesco, Morrisons and Sainsbury’s, which recently forked out £1.4bn for Argos owner Home Retail. Sainsbury’s reported a 14% drop in underlying profit this week to £587m, as the competition continues to bite.

Despite an expansion drive in clothing, total group sales across its 601 supermarkets declined by 1.1% to £25.8bn, leading to an 8% cut to the full-year dividend.

In an effort to “remain competitive”, Sainsbury’s has lowered prices on 1,900 products in the last year, it said. Government inflation measures are running at 0.5% to 1.1%, but food prices have now fallen every month since September 2014, according to supermarket monitor Kantar.

“Prices are actually 4% lower, would you believe,” Sainsbury’s chief executive, Mike Coupe, told the BBC. His pay has been increased.