John Allan, chairman of Tesco, has predicted that “the worst is yet to come” on food price inflation.
In an interview with the BBC, Allan estimated that supermarket prices could rise as much as 5% in the first quarter of the year. He said that Tesco’s food price inflation over the last three months has been limited to around 1%, however he added that grocers and suppliers were not immune from rising operational cost.
He said: “We are impacted by rising energy prices, our suppliers are impacted by rising energy prices. So the likelihood is that that inflation figure will rise.”
Price matching
Allan also acknowledged that the cost of food is having an impact on the household budgets of people on lower incomes. He said: “I think the combination of increasing energy prices, the impact of National Insurance increases [in April] on people’s incomes, and to a much much lesser extent increasing food prices, is going to squeeze the hardest-up still harder.”
When asked about the impact of the price rises on everyday essentials, Allan said: “Price rises depend on individual products – coffee is going up, but other things like the cheapest tin of baked beans in Tesco is cheaper than it was five years ago.
“As far as Tesco is concerned, we have 2,100 products on our lowest price. We’re either price matching against Aldi, or it’s our own exclusive at Tesco range. That number [of products] has been increasing in recent months rather than decreasing.”
Pay rises
Last week, governor of the Bank of England Andrew Bailey said that people should not ask for big pay rises as it would feed into higher inflation. When asked if Tesco would be offering the same advice to employees, Allan said that he thinks that “is the wrong direction for people to go in.”
He said: “We are not telling people not to take a pay rise. We think our colleagues deserve pay rises.
“We have given 5-6% raises to our distribution colleagues, and we’re in the midst of negotiations, which will probably lead to a similar result for our store colleagues.”
