Increased price of branded goods affecting shoppers: A-Level Business in the News
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What's the story?
According to a new report by the UK's Competition and Markets Authority (CMA), manufacturers of popular food brands have been raising prices over the past two years by more than their increased costs would necessitate. This extra profit padding has contributed to the rapid rise in prices paid by shoppers for items like baby formula, baked beans, and pet food.
The CMA examined pricing data for 10 common grocery categories and found that about 75% of branded food suppliers have been making higher profit margins on individual products recently. However, the food companies contend they have done everything possible to absorb swelling operational expenses.
While much of the overall food inflation stems from spiking energy and fertiliser costs, the makers of most big-name food products across the 10 categories studied have tacked on price upticks exceeding their escalating costs. This has funnelled consumers toward less expensive own label items. So, counterintuitively, the branded goods have ceded market share and seen declining revenues.
The category raising particular concerns is baby formula, where exorbitant price hikes over two years have delivered hefty profits but limited affordable alternatives for parents. The UK baby formula market is dominated by Nestlé and Danone and parents are not shown to value lower priced generic substitutes. The CMA suggests new parents could save £500 annually by comparing baby formula prices between brands. They emphasize that cheaper formulas still must deliver essential nutritional needs.