Despite some recent decreases, food inflation remains high. How are retailers approaching this from a hiring perspective?
Last month, the government had to distance itself from a report in The Telegraph that voluntary price caps on basic products would soon be introduced in UK supermarkets. (A similar, opt-in system has recently been extended in France, meanwhile.) ‘The government has never been considering imposing price caps’, a spokesperson said not long after the news met with indignation from food retailers. ‘We continue to engage with supermarkets about the best way to support consumers.’
Not quite back to the 1970s
Still, that Rishi Sunak and Jeremy Hunt were rumoured to be considering price controls at all – a policy not seen in British supermarkets since the 1970s – just goes to show what a sticky issue food inflation is. The prices of food and non-alcoholic beverages rose by 19.1% in the year to April 2023 – the highest rate in over 45 years, according to the Office for National Statistics. The rate has since eased slightly, from 18.4% in the year to May 2023 and now to 17.3% in the year to June 2023. Still, shoppers are feeling the pinch; inflation as a whole may have fallen to 7.9% in June, though this remains well above the Bank of England’s 2% target.
What are supermarkets doing?
While it doesn’t look set to become a government-mandated policy anytime soon, we’ve already noticed that Asda have pledged to freeze the prices of many basic products until the end of August; food retailers know that they need to stay competitive on everyday items like bread and milk. Meanwhile, the price gap between own-brand offerings and name brands (e.g., Heinz ketchup) remains significant. It may not seem that way, given the rate of food inflation, but consumers are actually getting an okay deal compared to price margin. Supermarkets are seeing budgets being squeezed from the consumer angle; many are following Lidl and Aldi’s lead in offering less variation and products in an effort to keep costs down.
Revenue management and pricing key areas for talent
So, what does this mean from a talent perspective? We’re seeing a lot of companies developing and organically improving their pricing and revenue management functions. This is particularly pertinent for large conglomerates: they want to bring in people to deal with metrics and margins for the huge portfolios of brands they deal with. Retailers will be asking themselves: How can we improve retention, footfall, and partnerships? Companies like Ocado provide interesting takes on how to manage this: having clear divides between the platform and partnerships appears to be working for them!
Customer loyalty is crucial
In the end, supermarkets need to think about loyalty – that is, how to ensure customers will trust and return to them time and again – and this comes down to understanding what they want. For many people right now, that translates to keeping costs down. A lot of what we’re doing for retailers at the moment is helping them to strengthen their revenue management and pricing, letting them stay ahead of the game on affordability. This is an area of particular concern for UK retailers, with Brexit further impacting on supply chains already feeling the strain from the lingering effects of the war in Ukraine and the aftermath of COVID-19.
Will we see food inflation drop further this year? Watch this space...