Supermarkets: Brexit and Your Shrinking Shop: Channel 4 Dispatches

20 February 2017

Monday 20th February, Channel 4, 8pm

In the UK we import 48% of our food, as the pound has fallen in the wake of Brexit the food that we buy is costing us more. Dispatches looks into the true cost of our supermarket shop.

A MySupermarket survey of 175,000 products, commissioned by Dispatches, compared average prices of food categories on 23rd June 2016 and 31st January, 2017. The survey found price hikes in essential items in Morrisons, Tesco, Sainsbury’s and Asda.

Richard Hyman, Retail Analyst - The fall in the pound is fundamental, 15% and more is a very significant number, it’s a huge chunky increase in costs to have to absorb. And it’s not just the food, its fuel prices, it’s the packaging, it’s all sorts of associated items.

Price Rises in key supermarkets and the rising cost of cheese:

Dispatches found price rises of more than 5% across a range of essential food categories in our leading supermarkets

• In Tesco, the price of flour rose by 6.1%
• In Sainsbury’s, bags of frozen vegetables rose by 5.5%
• In Asda, bottles of chilled juice soared by 6.6%
• In Morrison’s, tubs of ice cream rose by 8.2%

And it’s not just imported foods that have been affected by the fall in the pound.

Some of the highest price rises have been on dairy foods, butter, cheese and milk –which are produced right here in the UK by British dairy farmers. 

The Clothier family have been making cheese for 200 years. The milk used in its cheddar comes from British farmers – but because their milk is bought and sold around the world, the price is actually set on the international market.  So when the value of the pound fell, the price of milk rose. 

Richard Clothier, Managing director, Wyke Farms

Harry:                So Rich, each one of these is 20 kilos of cheese and this is a tonne of cheese in total?

Richard:             Yes.

H:                     So how many litres goes into one of these 20 kg boxes?

R:                     One 20 litre box takes 200 litres of milk to make it, that’s about 400 pints to make just this box of cheese.

H:                     And so the cost increase for you, how much extra was it for this tonne.

R:                     Its 10,000 litres to make a tonne of cheese like this at an extra 10 pence, so that’s an extra £1,000 per tonne.

H:                     Wow.

R:                     So it’s gone up by a third.

H:                     What in the space of a couple of months?

R:                     Literally in the space of about a month.

40% of all supermarket groceries are sold on promotion.

And as the cost of products is frequently changing consumers may not necessarily notice when prices go up. To give an example, last month, Tesco put 37 of its beers onto multi-deal promotions. But what shoppers might not have noticed is that the price of the beer when bought individually had gone up by an average of 16% a bottle.

So are they shielding us from price rises or making them harder to spot?

Shrinkflation

Supermarkets are reluctant to put their prices up, as in 2008 this pushed shoppers to discount supermarkets.  They have found a solution to their problem, rather than increasing the price of goods, they are decreasing the size.

Manufacturers have blamed the rise in the cost of raw materials such as cocoa, fish and oranges – as well as in packing – for reductions in product sizes since the referendum

Gorkan Ahmetoglu, business psychologist, “I think retailers believe that they have to become more sophisticated, simply because of the fear that increase in prices will make consumers more aware of what they’re shopping for //which is the last thing that retailers really want. So there is very good reason to hide price rises by any means necessary, including shrinkflation.”

 

Product	Original Size	New Size	Price
Maltesers	121g	103g
Birds Eye Fish Fingers	12 in a box	10 in a box
Tropicana	1.75l	1.6l
Mr Kipling Angel Slices	9 in a box	8 in a box	£2.35 (Waitrose)
Iceland frozen chips		250g lighter	£1
12pack Morland Old Speckled Hen Ale	500ml	440ml	£12 (Tesco)
Morrisons Milk Bottle Sweets	80g	75g	37p
ASDA Turkey Mini Fillets	573g	500g	Was £3.50. Increased to £4.50
Sainsbury’s Taste the Difference Pork Chipolatas	20 sausages	16 sausages	£2.63 – now £3
Bulmer’s flavoured cider	568ml	500ml	£2

Premier Foods – which makes Mr Kipling cakes - said they recommend a price for their products but the retailer gets to decide

The British Retail Consortium responded: “Major supermarkets have worked with Government and public bodies to make pricing clearer and simpler for customers, such as improving the way that unit price is displayed. Sizing and pricing of products are regularly reviewed and are impacted by a number of factors including: the cost of raw materials, commercial negotiations with manufacturers and changing portion sizes Prices and sizes of all products are clearly labelled so that customers can make informed decisions about their purchases.”

 

Rising prices of food and wine in restaurants:

When questioned for a Dispatches survey, almost three quarters of restaurant, café and bar owners said they would be putting up the bill to consumers.

Almost 30% of our food is bought from Europe; Cibosano has been supplying specialist Italian foods to restaurants for 14 years

Totuccio Castiglione, Owner of Cibosano Ltd, “These are the products that we actually import here on a weekly basis from Italy, so parmesan, mortadella the famous bologna, then specific prosciutto de Parma –and again the other products such as olives, vegetables, butter…. Brexit made olive oil more expensive, nature’s made the olive oil more expensive, more expensive at the moment.  We’ve seen increases in olive oil as low as 20% and as high as 34% already.”

Britain is the second biggest wine importer in the world buying in 99% of all the wine we drink from countries across the globe.

Miles MacInnes, Jascots Wine Merchants

This is a particularly British problem, so it’s the value of the pound that’s the issue and it has lost value against all major currencies in the world. So it’s a little bit different from the situation that we saw in 2008/9 where the pound was a bit shaky but other western economies were experiencing similar things, so relatively this is a much more acute problem.

We have to deal with the inflation that’s coming due to the foreign exchange and its severe.

The wine we import is predicted to cost an extra £400 million pounds this year – putting up to 29 pence on a bottle in the shops. Or as much as £1 on a bottle of house wine when we drink out.

Protected Food Labelling Scheme

Food producers are battling to protect some of Britain’s most popular heritage foods including cheeses, like Blue Stilton or the Melton Mowbray pork pie. These are protected in law by EU under a labelling scheme – but first they must qualify.

What makes a Melton Mowbray pie different from a normal pork pie? The pie has to be made in a distinct geographical area, Melton Mowbray is in the middle, and be made from uncured pork. Unlike factory made pies – it’s baked in the oven without a tin to support the sides.

But foods such as these will lose their protection in law once we break from the EU. Dispatches asked the Chairman of the Protected Food Names Association whether it was scaremongering to worry that when we leave the EU there will be foreign producers knocking off cheap versions of Cornish pasties or Melton Mowbray pork pies.

Matthew O’Callaghan, Chairman of the Protected Food Names Association:

We’re not saying it’s going to happen overnight, we’re not scaremongering. What we’re saying is we ought to, in a timely manner get a scheme to replace the current scheme. Nobody wants to buy Champagne made in North Korea, why should they want to buy a Melton Mowbray pork pie made outside of this area?

The UK government has suggested replacing the scheme with trademarks - but the industry says this won’t work

Matthew: It’s a lot more expensive. You have to get a trademark for every single European country, that’s 27 of them. It’s up to you then to police your trade mark and go to court whereas with the EU scheme it is up to the government and trading standards to go to court on your behalf. If we go back to the situation of a free for all, my view is that you will find within five to seven years a large sector of the Melton Mowbray pork pie market will be dominated by fake Melton Mowbray’s.

 

SUPERMARKETS: BREXIT AND YOUR SHRINKING SHOP: CHANNEL 4 DISPATCHES - Monday 20th February, Channel 4, 8pm

Reporter: Harry Wallop

Prod/Dir: Claire Burnett

Exec Prods: Adam Vandermark, Chris Shaw

Prod Co: ITN Productions