Skip to content
Search
AI Powered
Latest Stories

CMA asks supermarkets to review unit pricing practices

CMA asks supermarkets to review unit pricing practices
(Photo by Matthew Horwood/Getty Images)
Getty Images

The Competition and Markets Authority (CMA) has on Wednesday published an initial update on its ongoing work to tackle cost of living pressures in groceries with the publication of two reports: an assessment of retail competition in the groceries sector and a review of unit pricing practices across major retailers.

The watchdog has also written an open letter to grocery retailers on the use of unit pricing, calling on them to review their unit pricing practices in light of its report, which identified several practices that the CMA considered as problematic, likely to prevent consumers from making informed decisions when comparing products.


The CMA asked retailers to:

  • ensure that they unit price all their products of the same type using the same metric;
  • display the unit price of each product clearly next to the product and selling price in-store and online;
  • give unit prices for products on promotion for all types of promotions where this is feasible. For example, for price reductions, promotions where a loyalty price is presented alongside a standard selling price, and multi-buy promotions for products of the same price and size across both in-store and online;
  • review staff practices, procedures and training so that mistakes in unit price labelling do not occur.

“With so many people struggling to feed their families, it’s vital that we do everything we can to make sure people find the best prices easily. We’ve found that not all retailers are displaying prices as clearly as they should , which could be hampering people’s ability to compare product prices,” Sarah Cardell, CMA chief executive, said.

“We’re writing to these retailers and warning them to make the necessary changes or risk facing enforcement action. The law itself needs to be tightened here, so we are also calling on the government to bring in reforms.”

Over the past two months, the CMA has assessed how retail competition is working in the UK grocery sector, particularly between supermarkets such as Asda, Morrisons, Sainsbury’s and Tesco as well as discounters, including Aldi and Lidl. Looking at the effectiveness of retail competition across the market, this stage of the CMA’s review has focused on the extent to which rivalry between retailers ensures they keep their prices as low as possible and whether consumers can shop around to get the best deals.

Although food price inflation is at historically high levels, the CMA said evidence collected to date indicates that competition issues have not been driving this.

It noted that operating profits in the retail grocery sector fell by 41.5 per cent in 2022-23, compared with the previous year while average operating margins fell from 3.2 per cent to 1.8 per cent. This is due to retailers’ costs increasing faster than their revenues, indicating that rising costs have not been passed on in full to consumers, it said.

Consumers are shopping around to get the best deals has also restricted retailers’ ability to raise prices without losing business, it added.

The CMA said competition for individual product categories or across the wider grocery supply chain will be an important focus for the next phase of its work. It has identified ten product categories for further assessment, which are: baby formula, milk, bread, pet food, poultry, mayonnaise, baked beans, chilled desserts, ready meals, and lemonade.

“The overall evidence suggests a better picture than in the fuel market, with stronger price competition between all of the supermarkets and discounters. In the next phase of our work, we will examine competition and prices across the supply chain for the product categories we’ve identified. We’ll also continue to monitor the situation to ensure that competition remains effective as input costs start to fall,” Cardell said.

The review of unit pricing, which provides critical information to ensure people can compare prices effectively, looked at 11 supermarkets and 7 variety retailers.

Small stores (those with a retail floor space of not more than 280 square metres), including most convenience stores, have not formed part of the review as they are exempt from having to display unit pricing information.

The CMA has found compliance concerns with the Price Marking Order (PMO) amongst all those it reviewed, however for some retailers these were relatively minor. The CMA has identified that compliance is worse amongst some variety retailers.

The regulator noted that some of the problems stem from the unit pricing rules themselves, which allow unhelpful inconsistencies in retailers’ practices and leave too much scope for interpretation. As a result, shoppers may be finding it hard to spot and compare the best deals.

The CMA’s concerns relate to:

  • Consistency – different measurements are being used for similar types of products, making it hard for consumers to compare deals on a like-for-like basis. For example, tea bags being priced per 100 grams for some products and others being unit priced per each tea bag.
  • Transparency – missing or incorrectly calculated unit pricing information both in store and online. For example, 250ml handwash costing £1.19 but unit priced at £476.00 per 100ml and unit pricing information unavailable online until items were selected.
  • Legibility – unit pricing information being difficult to read, for example text on labels being too small or shelf edge labels being obscured by promotional information or by shop fittings.
  • Promotions – some retailers not displaying unit prices for any products on promotion.

In its report, the CMA has set out recommendations on the unit pricing rules and has called on the government to reform this legislation, to help shoppers spot the best deals. The CMA will publish the findings of its consumer research into the use of unit pricing in Autumn 2023.

ACS welcomes findings

The Association of Convenience Stores (ACS) has welcomed the CMA findings.

“This is a timely and important report that looks at the business costs and pressures that have driven inflation for consumers,” ACS chief executive James Lowman said.

“The UK has a highly competitive grocery market in which convenience stores play an important part, especially in rural and isolated communities. The conclusion that policy-makers should draw from this report is that the best way to promote lower prices for consumers is to help retail businesses to navigate a period when their costs are extraordinarily high.”

ACS has provided evidence to the CMA as part of their investigation, highlighting the significant cost increases facing convenience stores over the last year – most notably in energy costs, employment costs and wholesale product prices. The evidence notes that gross margins in convenience stores typically run at around 20-30 per cent depending on the product mix, with net margin being all but eroded for many businesses over the last year.

ACS has guidance on fair trading and weights and measures regulations, backed by Surrey and Buckinghamshire Trading Standards.

More for you

Volumatic welcomes new FCA rules safeguarding access to cash

Volumatic welcomes new FCA rules safeguarding access to cash

As industry leaders is cash handling, Volumatic has long supported the use of cash and the importance of maintaining access to cash for both consumers and businesses. The company recognises the importance of the new set of rules created by the Financial Conduct Authority (FCA) two months ago, to safeguard access to cash for businesses and consumers across the UK.

Since introduction, the new rules are intended to ensure that individuals and businesses who rely on cash can continue to access it and the outcome has already sparked the creation of 15 new banking hubs across the UK, including one in Scotland, with many more to follow.

Keep ReadingShow less
Jisp unveils new NPD service

Jisp unveils new NPD service

Retail technology company Jisp has launched an NPD service as part of its new Direct to Retailer business unit.

The new NPD service will allow brands to launch or trial new products in a guaranteed number of convenience store locations, with on the ground review of execution by Jisp’s retail growth manager team, and performance data and insights deliverable through its scanning technology and back-office systems.

Keep ReadingShow less
Tesco launches price cuts in Express convenience stores
File image of Tesco Express

Tesco launches price cuts in Express convenience stores

Tesco is slashing the price of more than 222 own-brand and branded products in its Express convenience stores.

Essentials including milk, bread, pasta and coffee are included in the lines which have been reduced in price by an average of more than 10 per cent at Tesco Express stores. The retail giant has made more than 2,800 price cuts across stores in recent months. With 2,048 of convenience stores at the end of the 2023-24 financial year, Tesco aims to benefit hundreds of thousands of customers from the cheaper deals.

Keep ReadingShow less
vape and cigarette
Photo: iStock

One in five ex-smokers in England now vape, study finds


Summary
1. One in five people who have successfully quit smoking in England currently vape, with an estimated 2.2 million individuals using e-cigarettes as a smoking cessation tool.
2. The increase in vaping among ex-smokers is largely driven by the use of e-cigarettes in quit attempts, with a rise in vaping uptake among people who had previously quit smoking for many years before taking up vaping.
3. While vaping may be a less harmful option compared to smoking, there are concerns about the potential long-term implications of vaping on relapse risk and nicotine addiction. Further research is needed to assess the impact of vaping on smoking cessation outcomes.


Keep ReadingShow less
Bira engages with Treasury on Budget fallout, business rate reform
(Photo by Christopher Furlong/Getty Images)
Getty Images

Bira engages with Treasury on Budget fallout, business rate reform

Independent retailers association Bira has held a meeting with members of the Treasury team to discuss concerns following its robust response to the Government’s recent Budget announcement.

The Budget, labelled by Bira as "devastating" for independent retailers, was met with widespread indignation from Bira members.

Keep ReadingShow less