UK Government to Review Supermarket Loyalty Schemes

<img width="250" height="151" src="https://www.leaprate.com/wp-content/uploads/2022/05/UK-Big-Ben-04-250×151.jpg" class="webfeedsFeaturedVisual wp-post-image" alt="" decoding="async" style="float: left; margin-right: 5px;" link_thumbnail="" srcset="https://www.leaprate.com/wp-content/uploads/2022/05/UK-Big-Ben-04-250×151.jpg 250w, https://www.leaprate.com/wp-content/uploads/2022/05/UK-Big-Ben-04-700×422.jpg 700w, https://www.leaprate.com/wp-content/uploads/2022/05/UK-Big-Ben-04-768×463.jpg 768w, https://www.leaprate.com/wp-content/uploads/2022/05/UK-Big-Ben-04-120×72.jpg 120w, https://www.leaprate.com/wp-content/uploads/2022/05/UK-Big-Ben-04-245×148.jpg 245w, https://www.leaprate.com/wp-content/uploads/2022/05/UK-Big-Ben-04-500×301.jpg 500w, https://www.leaprate.com/wp-content/uploads/2022/05/UK-Big-Ben-04.jpg 880w" sizes="(max-width: 250px) 100vw, 250px" /><p>Today’s report comes after an initial assessment in July that focused on retail competition in the grocery sector. The assessment identified ten product categories, including milk, baked beans, and baby formula, for further analysis in the second phase of work to gain a deeper understanding of competition across the supply chain, focusing on own-label and branded food suppliers.</p>
<p>Despite a drop to 10.1% in October 2023, food price inflation remains historically high. The CMA attributes this largely to rising input costs, especially for energy and key agricultural inputs like fertilisers.</p>
<p>The CMA’s evidence suggests that in the last two years, approximately three-quarters of branded suppliers in products such as infant formula, baked beans, mayonnaise, and pet food have increased their unit profitability, contributing to higher food price inflation.</p>
<p>However, own-label products often offer more affordable alternatives with lower profit margins for their suppliers, who compete to secure and maintain contracts with retailers. In most relevant product categories examined, consumers have switched from branded to own-label options or reduced consumption as food prices have risen.</p>
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<p>This shift has led to declining market shares and profits for branded products, promoting healthy competition and helping consumers mitigate the impact of high food price inflation. Overall profit margins for most branded manufacturers have decreased since 2021 due to reduced sales volumes as consumers switch to cheaper alternatives.</p>
<p>Baby formula stands out as a product category with different dynamics. Prices for baby formula in the UK have risen by 25% over the past two years. Evidence indicates that similar to other products, branded suppliers of baby formula have increased their prices beyond their input costs.</p>
<p>The market is highly concentrated, with two firms controlling approximately 85% of the market share, and brands have maintained high profit margins in the last two years. An update on this investigation into baby formula is expected in mid-2024.</p>
<p>With some supermarkets offering cheaper prices exclusively to loyalty card members, the CMA intends to review the use of loyalty scheme pricing by supermarkets in early 2024.</p>
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