Christmas food price rises won't be as bad as feared, says Sainsbury's boss

The boss of Sainsbury's has said consumers will be spared dramatic price rises this Christmas but reiterated calls for the Government to relieve pressure on businesses.

Simon Roberts said food inflation had not 'moved anything like' the dire levels predicted by the wider industry in the immediate outbreak of the Middle East conflict. 

The Food and Drink Federation's forecasts saw food inflation topping 9 per cent by the end of the year, but prices were unchanged at 1.3 per cent in the year to September, according to figures from the Office for National Statistics. 

But the supermarket boss urged the Government to keep pressures on the cost of food and employment down. 

In a pre-Budget plea, Roberts urged the Chancellor to use next week’s Budget to support businesses instead of ‘adding further taxes or further regulatory impacts to an industry that’s already very heavily taxed.’

He said that the shock increase in National Insurance contributions had increased costs in the retail and hospitality sectors and the Government should ‘make sure we don't do anything to further aggravate that situation.’

Defending reports of supermarkets’ pleas to be excluded from high business rates, Roberts said that retail is ‘one of the highest taxed sectors’ and includes major employers which employ millions of people.

The Chancellor last week met with bosses from Morrisons, Sainsbury's and Tesco, where Roberts said he felt 'heard'.  

The remarks from the chief executive came as Britain’s second biggest grocer upgraded its annual profit forecasts and said customers will not ‘trade down’ this Christmas despite economic pressures.

The group had been forecasting profits between £965 million and £1.065 billion but raised this to a range between £1.025 billion and £1.065billion - after the impact of the war in the Middle East had taken less of a toll than feared.

The grocer said booming sales of its own-label premium Taste The Difference ranges helped grocery sales rise 2.9 per cent to £13.2 billion.

Customers were ‘planning early’ for the festive season, with Sainsbury's adding more online grocery shops to keep up with demand. 

Roberts added: ‘I think [what] will be a real theme into Christmas, is customers don't want to trade down. They want the best value and the best quality, and that's really what we are focused on.’

There had been ‘a lot of concern earlier in the year as to where food inflation might go,’ Roberts said, but ‘actually [it] has yet to see much of a move’.

But he said there was ‘pressure’ in the system heading into the autumn and winter, including fertiliser prices and energy costs. ‘We’re going to be doing what we’ve done consistently, working really hard to give customers the value that they expect,’ he said.

But shares tumbled 3 per cent after Sainsbury's revealed slower sales growth. 

Lucy Rumbold, equity research analyst at Quilter, said: 'It’s worth noting that inflationary pressures stemming from developments in the Middle East have taken longer than initially expected to feed across European markets. 

'Grocers such as Sainsbury’s have therefore kept price growth below headline inflation to protect their value proposition, which has seemingly weighed on like-for-like sales. However, this as a sensible strategy. 

'If Sainsbury’s continues to resonate with households on value for money, it should be well positioned to benefit as inflation is eventually passed through. We expect this to become more evident towards year-end, as higher fertiliser costs feed through and lower-cost inventory is depleted.'