Surging food inflation hits restaurant sales
Food inflation is accelerating once again, eating into consumers’ pockets and pushing prices higher across the board.
Inflation at the grocers hit five per cent in the four weeks ended August 10, down from 5.2 per cent in the previous month but well above the wider UK rate of 3.6 per cent.
Real wage growth, after accounting for inflation, was around one per cent in July.
“We’ve seen a marginal drop in grocery price inflation this month, but we’re still well past the point at which price rises really start to bite and consumers are continuing to adapt their behaviour to make ends meet,” Fraser McKevitt, head of retail and consumer insight at Worldpanel, said.
“What people pay for their supermarket shopping often impacts their spending across other parts of the high street too, including their eating and drinking habits out of the home… casual and fast service restaurants especially have seen a decline in visitors over the summer.”
Trips to casual restaurants fell six per cent year on year in the three months to July 15.
Sales at the grocers rise
Overall, sales at the grocers grew by four per cent in August, according to the latest figures from Worldpanel by Numerator.
Lidl and Ocado were tied for top spot as the fastest growing grocers over the 12 weeks to August 10, with sales at both retailers up by 10.7 per cent compared to the same period last year.
Tesco retained its crown as the UK’s biggest grocer, with its most significant monthly share gain since December 2024 as its hold of the market rose by 0.8 percentage points to 28.4 per cent. Sales rose 7.4 per cent year on year.
Asda continued to lose market share, shrinking by 0.9 percentage points year on year and recording a 2.6 per cent sales drop.
Online sales across all retailers rose by 6.7 per cent over the 12 weeks.
Inflation: Why are UK food prices rising?
Worldpanel has estimated that Brits’ average household spend at the grocers has now reached £5,283 a year, a figure which could rise by £275 by the end of the year.
The prices of fresh staples, such as butter, red meat, and chocolate have driven the increase in grocery inflation.
“The pressure on food and drink manufacturers continues to build… rising costs are gradually making their way into the prices shoppers pay at the tills,” sustainability director at The Food and Drink Federation (FDF), Balwinder Dhoot, said.
These pressures include higher wage costs due to tax hikes in April, plus low yields due to extreme weather and a crucial shortage of carbon dioxide used in farming.
“Despite fierce competition between retailers, the ongoing impact of the last budget and poor harvests caused by the extreme weather have resulted in prices for consumers rising,” Kris Hamer, insight director at the British Retail Consortium, said.
The areas that the UK has traditionally relied on – livestock and arable crops – are under significant pressure.
Beef and lamb farming have both been suffering from falling cattle numbers and higher costs for feed, energy and transport.
A shortage of carbon dioxide, fuelled by the closure of ammonia plants – CO2 is a byproduct of the fertiliser production process – due to high energy costs, has also led to a slowdown in production on UK farms.