When upscale Waitrose Scrap with Asda Within its value range, it’s clear that no one is immune to the cost of living crisis. Supermarkets don’t come to an end. But they are still squeezed.

Grocery stores sometimes do well with inflation. Consumers are ready to expect price increases, and supermarkets have successfully passed prices on in the past. Tesco and J Sainsbury profited in previous periods of price increases.This time will be different, and not just because of anti-poverty activists Jack Monroe will evoke any amazing upswing.

The impact of inflation on the supermarket sector can be complex.But broadly speaking, mild inflation is good as long as purchasing power remains the same, as was the case with Brexit Food prices rose in 2017.

We’re clearly past that point now.UK faces biggest drop in living standards in a year over 60 years. Food prices rose at their fastest annual pace in more than a decade in February, may go further. Nearly 60% of food and beverage producers said they had to pass on the March gains to other industries. A third of Britons have already cut back on their grocery shopping. Consumers will make transactions.

The big four, Tesco, Sainsbury’s, Asda and Wm Morrison, insist they have learned from the financial crisis when they passed on price hikes and maintained profit margins – and permanently ceded market share to discounters Aldi and Lidl for British groceries market drivers. Former Tesco boss and current Morrison chairman Sir Terry Leahy said earlier this year that the UK was “past the peak Disruptive impact of discounters”. He said supermarkets had learned how to compete.

They may know how to do it, but it comes at a cost.

The Big Four understand that they have to convince consumers of their proof of value in order to keep as much of their spending as possible in-store. Consumers don’t like switching. Kien Tan, Senior Retail Consultant at PwC, explains: “The top priority for grocers is to offer a wide enough range of premium and low-budget options in key product categories so that customers can get discounted deals in the categories they want to save. ” .

But NielsenIQ data shows that the two German groups currently have a market share of nearly 20%. Meanwhile, sales for Asda and Morrison fell particularly sharply, with Morrison down 9.9 per cent year-on-year and Asda down 8.7 per cent.

Thanks to what HSBC analyst Andrew Porteous called a decade of “restructuring and repositioning”, traditional players have closed the price gap with discounters, at one point as high as 25%. But Asda and Morrisons, which traditionally cater to value-conscious consumers, are seen as falling behind on their budget offerings. Asda’s £45m investment in its new ‘Just Essentials’ range, unveiled last week, proves it understands it needs some pain in price to shore up sales. However, despite Asda’s 2021 annual profit reported last week of £1bn, the debt load it has taken on in private equity buyouts over the past two years is likely to limit the two retailers. Higher gasoline prices — and fuel profits — will only soften part of the blow.

As with discounters, however, another big problem in the industry is their own: Tesco.

Tesco has been in tears. Most groups saw their market share fall – but Tesco held steady for over a year and increased over two years. That gives it more advantages than its size already gives it when it comes to negotiating with constrained suppliers. Analysts expect the company to report its biggest annual pretax profit in eight years next week. Discounts offered through its membership card price loyalty program already make it the cheapest of its kind, but more than any other company can afford to increase the cost of inflation to attract more customers.

Where Tesco goes, others must follow. Investing in a narrow range of values ??is one thing, but a resurgent Tesco could put pressure on it to dampen prices more broadly.

Even without a price war, it could bring pain to the industry as a whole. Prepare for a melee.

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