Cost of a shopping basket soars in the 'phoney' supermarket price war

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The Independent Online

British supermarkets have introduced massive price hikes over the past year, shattering the myth of a so-called price war in which grocers are bending over backwards to help hard-pressed consumers.

Tesco, Asda and Sainsbury's have ramped up the price of many products by between 22 and 32 per cent over the past 13 months, hitting customers at a time when the cost of living is soaring, The Independent can reveal.

The soaring figures illustrate the level of food inflation heaped on consumers, as they face spiralling petrol prices, rising utility bills and stagnating house prices. The revelation comes at a time when grocers are as active as ever in claiming that they are delivering millions of pounds of price cuts to consumers.

On a sample of 17 products, Sainsbury's has hiked prices by 31.6 per cent, Tesco by 27.5 per cent and Asda by 21.6 per cent between 11 June 2007 and 11 July 2008, according to grocery price comparison site, mysupermarket.co.uk.

The Independent tracked 17 products including thick-sliced white bread (800g), six pints of semi-skimmed milk, English butter (250g) and garden peas (1kg).

Tesco has raised the price of white bread from 54p to 72p; Sainsbury's has hiked the price of Basmati rice (1kg) from 90p to £1.89p; and Asda has increased English butter from 58p to 94p, as have its other two rivals.

These figures dwarf the estimates of the British Retail Consortium, which this week said that food cost 7 per cent more in British supermarkets in June than it did in the same month last year.

Before the last weekend in June, Tesco said it would reduce the price of 3,000 items by up to 50 per cent, while Asda promised to sell 10 staple items, including bread, eggs and butter for only 50p until end of trading on 29 June. However, industry experts say the current activity on price does not compare to previous battles, and is more about PR than helping consumers.

Greg Lawless, an analyst at Blue Oar, says: "I don't think there is a price war. This is a price skirmish. The last proper price war we had was in the early 1990s ... It's not in Tesco and Asda's interests to launch a price war as it would suck profits out of the sector."

Retailers themselves agree. Malcolm Walker, chief executive of the frozen food specialist Iceland, said successful retailers would not do anything to jeopardise their profit margins. He said: "No retailer can afford to drop more than one point – one-tenth of 1 per cent – on the gross margin and anything they do on price is tactical." He added: "It is all marketing and spin."

Bryan Roberts, global research director at Planet Retail, made the point that price cuts and promotions were often funded by suppliers. He said: "Effectively, promotions cost the retailers nothing because it is the suppliers who are often asked to invest in these 'price promotions'."

The big three grocers say that while the price of commodities, such as wheat, meat and dairy products, have risen sharply over the past year, they try to cut prices for products that are not affected by the same inflationary pressures.

A spokeswoman for Sainsbury's, which claimed last month that its food price inflation was about 3 per cent, said: "The increases in the cost of commodities such as wheat and dairy have had an impact on the price of foods." An Asda spokeswoman said: "We disagree that supermarkets are unfairly passing on costs to customers. The 7 per cent [price rise] figure from the BRC is realistic. It's easy to skew figures by only choosing a certain basket of items for price comparison."

A Tesco spokeswoman said: "We know customers are tightening their belts and wherever possible we look at cutting prices to help them."

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