U.K. food price rises look to have steadied, according to fresh data from one of the industry's benchmark reports, but retailers are increasingly using a new tactic to pass on costs to customers that could make inflation measurements increasingly tricky.
Grocery price inflation was little-changed at 3.2% for the 12 weeks to July 16, according to data released Tuesday by Kantar Worldpanel, while supermarket sales increased 3.9% in the period marking the fourth consecutive period of where growth exceeded 3%.
"Robust market growth this year has been boosted by higher grocery inflation, but consumers will be pleased to hear that price rises are no longer accelerating," Kantar Worldpanel Head of Retail and Consumer Insight Fraser McKevitt said in a statement. "Like-for-like inflation now stands at 3.2%, the same rate of increase as this time last month."
However, as food inflation eases, British consumers are having to deal with so-called shrinkflation, a tactic where manufacturers charge the same price for a reduced product size.
Britain's Office for National Statistics found that 2,529 products have decreased in size between January 2012 and June 2017, compared with just 614 products that had.
In an article released Monday, the ONS found that shrinkflation added 1.22 percentage points to the rate of inflation in the sugar, jams, syrups, chocolate and confectionary subcategory, but had no noticeable effect in other categories such as food and non-alcoholic beverages.
Chocolate manufacturers have blames the rising cost of cocoa and sugar for the reason they have decreased package size.
Last year, Mondelez (MDLZ) - Get Mondelez International, Inc. Class A Report cut the weight of its Toblerone chocolate bar yet kept the price the same due to the increase in price of raw materials. Mars Inc. has also decreased the size of it Maltesers, M&Ms and Minstrels.
Inflation in June fell slightly to 2.6%, according to the ONS, down from 2.9% in May putting a squeeze on real income growth, which will see the spending power of British consumers fall.
This was seen in Kantar Worldpanel's data, which show that supermarkets' own-brand lines now account for more than 51% of spending - a record high.