An update from the Competition and Markets Authority (CMA) on competition in the grocery market, reiterating the financial pressures that convenience retailers are facing with extraordinarily high costs, has been welcomed by the Association of Convenience Stores (ACS).
In its report, the CMA noted that operating profits in the grocery sector have fallen significantly over the last year as a result of costs increasing faster than revenues. The CMA also stated that “although food price inflation is at historically high levels, evidence collected to date by the CMA indicates that competition issues have not been driving this”.
ACS provided evidence to the CMA as part of its investigation, highlighting the significant cost increases facing convenience stores over the last year – most notably in energy costs, employment costs and wholesale product prices.
The evidence noted that gross margins in convenience stores typically run at around 20-30% depending on the product mix, with net margin being all but eroded for many businesses over the last year.
ACS chief executive James Lowman said: “This is a timely and important report that looks at the business costs and pressures that have driven inflation for consumers. The UK has a highly competitive grocery market in which convenience stores play an important part, especially in rural and isolated communities.
“The conclusion that policy-makers should draw from this report is that the best way to promote lower prices for consumers is to help retail businesses to navigate a period when their costs are extraordinarily high.”
As part of its review, the CMA has raised concerns about the transparency, legibility and consistency of unit pricing to ensure that consumers can make informed choices about which offers genuinely provide the best value. Most convenience stores are currently exempt from having to display unit pricing information.
