Britain’s farming union has accused the chair of Tesco of living in a “parallel universe” after he said food companies may be using inflation as an excuse to increase prices further than necessary.
Official inflation data for December, which was published last week, showed food prices were 16.8% higher than a year earlier, a rate not seen since September 1977, and one that was led by eggs, milk and cheese.
Asked by BBC television on Sunday whether food producers were taking advantage of the poorest in society, the Tesco chair, John Allan, said it was “entirely possible”.
He said the retailer, which is Britain’s biggest supermarket, with a 27.5% share of the grocery market, was trying “very hard” to challenge price rises it thought were illegitimate and had “fallen out” with “a number of suppliers”.
Minette Batters, the president of the National Farmers’ Union, said she was “slightly baffled” by Allan’s comments.
“It was almost like he was living in a parallel universe,” she told BBC radio on Monday, adding that farmers and growers were facing unprecedented increase in production costs.
“We’re seeing a wholesale gas price that’s 650% higher than it was back in 2019 and the cost inflation on the back of that has been unprecedented and it has dwarfed any price increases to date,” Batters said.
Allan said there had been “very robust discussions” between Tesco and a number of suppliers, and referenced last year’s spat with the US multinational Kraft Heinz.
“We didn’t have Heinz soup and Heinz tomato ketchup for a spell last summer when they tried to put through a large price increase at that stage. That was eventually settled,” he said.
“We’ve fallen out with other suppliers. So we do try very hard, I think, to challenge cost increases.”
Earlier this month, when Tesco reported better-than-expected Christmas trading, its chief executive, Ken Murphy, said the group had raised prices to a lesser extent than the overall market.
“We are battling (with suppliers) to keep prices down for customers and it’s an ongoing struggle but we’re doing our best,” he said.
“It is a constant to and for but there’s a fair bit of partnership involved as well,” Murphy said, pointing to its “price lock” scheme that will maintain prices on more than 1,000 branded and own-brand products until Easter.
“Our suppliers recognise that they also need to protect volume … they want to protect their market share, they want to work with us to do so,” he added.
Murphy said Tesco was in a constant dialogue with suppliers: “We’re just trying to make sure that only the justifiable price increases come through and that everything else is mitigated or held back.”
