Some branded suppliers have “pushed up prices by more than their costs increased”, according to a inquiry by the competition watchdog.
The Competition and Markets Authority (CMA) has been examining 10 product categories in a bid to see if shoppers are being ripped off during the cost of living crisis.
In a statement, the CMA said: “The evidence the CMA had collected over the last two years shows around three-quarters of branded suppliers in products such as infant formula, baked beans, mayonnaise, and pet food have increased their unit profitability and, in doing so, have contributed to higher food price inflation.”
But the report later revealed that explain that these increases were likely to have backfired as shoppers had clearly switched to cheaper, supermarket own brand, alternatives in a bid to save cash.
The CMA said it hoped the competition will help prices of branded goods come down.
But a number of major brands told the inquiry that when their costs started to fall they would offer promotions to customers, rather than cut the standard costs of their products.
The CMA said that more research was now needed, including in the baby formula sphere.
They said an update on their work into formula prices ‘will be published in mid-2024’.
Sarah Cardell, Chief Executive of the CMA, said: “Food price inflation has put huge strain on household budgets, so it is vital competition issues aren’t adding to the problem.
“While in most cases the leading brands have raised prices more than their own cost increases, own label products are generally providing cheaper alternatives.
“The picture is different when it comes to baby formula, with little evidence that people are switching to cheaper products and limited own label alternatives.
“We’re concerned that parents may not always have the right information to make informed choices and that suppliers may not have strong incentives to offer infant formula at competitive prices.
“We will investigate this further and consider whether changes to regulations are necessary to ensure parents can get the best deal possible.
The CMA also declared that it was going to review supermarket loyalty schemes in the next phase of its investigation.
Cardell added: “We have also seen an increase in the use of loyalty scheme pricing by supermarkets, which means that price promotions are only available to people who sign up for loyalty cards. This raises a number of questions about the impact of loyalty scheme pricing on consumers and competition and the CMA will launch a review in January 2024.”
