British families are being warned that the price of their groceries will go up by five per cent in the next six months.
The former CEO of Sainsbury’s, one of the big four supermarkets, says that after years of the cost of the weekly shop remaining stagnant, households should brace themselves for price increases.
Justin King said that the fall in value of Sterling following the Brexit vote would lead to “a profound change” for supermarkets.
Mr King ran Sainsbury’s for 10 years before deciding to step down from his role two years ago. During his time in charge, the price of goods rose slowely, even though the supermarket’s revenue was growing pretty much constantly. There were, however, times when food prices were in deflation.
But, the former food boss, who is now vice-chairman at investment firm Terra Firm, said that supermarkets would find themselves “squeezed in the jaws” as they tried to resist price increases while dealing with rising costs. He said he fully expected that some firms would not survive 2017.
He said that a return to inflation was inevitable next year, giving that the pound’s value has fallen by around 20 per cent since the June referendum. That has led to increased costs in purchasing ingredients and packaging from abroad. Proposed price rises have already led to rows between supermarkets and suppliers. Tesco and Marmite maker Unilever became embroiled in an argument which led to the love-it-or-hate-it product being removed temperarily from he shelves.
Mr King said: “Around 40% to 50% of what we buy is sourced abroad in a currency other than the pound, so with the current rates of exchange we could expect those things to be about 10% more expensive. And if that’s about half of what we buy, then that means something of the order of 5% inflation.”