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UK Grocery Inflation Eases – But Pressure Persists for Shoppers and Retailers

UK grocery inflation eased to 4.0%in the four weeks to 25 January, marking its lowest level since April last year and offering tentative relief to households still navigating elevated food costs.

However, while the pace of price increases is slowing, food inflation remains materially above long-term norms, and continues to sit at the heart of the UK’s cost-of-living debate.

The Bank of Englandis monitoring food prices closely, viewing them as a key driver of inflation expectationsamong consumers. This focus comes as Britain’s headline inflation rate rose to 3.4% in December, the highest level among the G7 economies, underlining the ongoing sensitivity of food prices in the wider inflation picture.

Supermarket Performance – Winners, Losers and Structural Shifts

Sales data over the 12 weeks to 25 January highlights a widening performance gap across the UK grocery sector.

• Tesco, the market leader, recorded 4.4% year-on-year sales growth, increasing its market share by 20 basis points to 28.7%, reinforcing its scale advantage and pricing power.

• Sainsbury’scontinued to gain momentum, with sales rising 5.3%, lifting its share to 16.2%, supported by strong own-label performance and loyalty engagement.

• Lidl GBremained the fastest-growing bricks-and-mortar retailer, posting 10.1% sales growth, as value-focused shoppers continued to trade down.

• Ocadoretained its position as the fastest-growing grocer overall, with sales up 14.1%, reflecting ongoing demand for online convenience despite higher delivery costs.

• In contrast, Asda continued to struggle. Sales fell 3.7%, with market share declining by 80 basis points to 11.5%, highlighting the challenges facing mid-market operators caught between premium propositions and hard discounters.
  
  

UK Food Council Insight

While easing grocery inflation will be welcomed by consumers, the data suggests pressure has not disappeared – it has shifted.

• Value remains king: Discounters and own-label ranges continue to outperform as households remain cautious.

• Market concentration is increasing: Scale leaders are consolidating share, strengthening their negotiating position with suppliers.

• Supplier margins remain under strain: Slower inflation does not equate to cost relief across energy, labour and logistics.

• Food inflation expectations matter: Persistent sensitivity to food prices risks anchoring inflation psychology, complicating monetary policy decisions.
  
  

For the UK food industry, the challenge now is not simply managing prices, but restoring confidence, affordability and resilience across the supply chain.

UK Supermarkets – Market Share and Sales Growth (12 weeks to 25 January)

• Tesco: 28.7% share | +4.4% sales

• Sainsbury’s: 16.2% | +5.3%

• Asda: 11.5% | −3.7%

• Lidl GB: +10.1% sales

• Ocado: +14.1% sales
  

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