Big chains have been accused of greedily fuelling inflation at the expense of their customers - but a closer look at the figures suggests this is not the case.
As Clive Black, head of consumer research at the investment bank Shore Capital, put it to clients this week:"Tesco UK achieves circa 4% margins due to its scale but also a massive capital outlay in superstores that it would not expend today with current returns. Tesco is not opening any supermarkets, what does that indicate?
"In the early 1990s, Sainsbury reported profits before tax of over £800m. We are forecasting less than £700m for the current full year after expending billions on capital expenditure." He says that, on the contrary, the British public and government are"blessed to have one of the most advanced food systems in the world" which has brought down the proportion of household income spent on food from more than a third immediately after the Second World War to just one tenth now.
Not only is fierce competition in the grocery sector driving down supermarket profits. It may also be hurting other parts of the food and drink supply chain. Intense competition hurts suppliers of essential products such as milk.
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