Competition & Markets Authority scrutiny reveals low margins in groceries sector

The Competition and Markets Authority (CMA) has set out the latest findings and the next steps in its ongoing review of the groceries sector. This shows a number of low margin food sectors had been highlighted for scrutiny but that the CMA will continue its work by concentrating on infant formula, unit pricing and loyalty schemes. 

The CMA update follows an initial assessment that focused on retail competition in the groceries sector published in July and highlighted by our blog Competition and Markets Authority Update on Groceries and Unit Pricing Published - Mills & Reeve (

The initial assessment identified 10 product categories for potential further consideration: baby formula, baked beans, bread, chilled desserts, lemonade, mayonnaise, milk, pet food, poultry and ready meals.

An overview of each category and the CMA findings is available here: Appendix A: Evidence and findings for individual product categories ( 

The evidence obtained by the CMA actually points to the low levels of profitability and vulnerability of a number of food sectors.  In particular bread is called out as ‘Public financials show that net profit for bread manufacturers is typically below 5% of revenue. It is common for manufacturers to make a loss in this category.

It is therefore important that the headline of certain brands increasing prices ahead of costs does not become the main rhetoric for retailers in seeking to shift blame for overall food inflation. 

Findings on Price Dynamics in Supply Chain

Across the food and groceries sector, the CMA found that high inflation has been driven largely by rising input costs, particularly for energy and key agricultural inputs like fertiliser.

However, additionally the CMA found indication that, over the last 2 years, around three-quarters of branded suppliers in products such as infant formula, baked beans, mayonnaise, and pet food have increased their unit profitability and, in doing so, have contributed to higher food price inflation.

It was found that non-branded products have not raised their costs in the same way resulting in consumer switch and lower sales of branded goods that has meant overall profit margins have fallen across most branded manufacturers since 2021.  This therefore evidenced that appropriate competition was working within the sectors.

The CMA has also heard from leading brands that they are aiming to use any future reductions in their input costs to offer customers more promotions, rather than cut the standard price they charge supermarkets for their products. 

The CMA has stated they are committed to continue to monitor indicators of retail competition and profitability, to ensure that people continue to benefit from competitive prices as input costs fall.

Infant Formula

Consumers have been less likely to switch away from brands in this category. Therefore, the CMA has reported it will be undertaking further work to better understand barriers to entry and expansion for baby and infant formula manufacturers and consider whether any changes to the regulatory framework could help the market work better.  An update on the CMA’s work into baby formula will be published in mid-2024.

Unit Pricing

The CMA concerns on supermarket ‘unit pricing’ and the transparency, legibility, consistency of the display of unit pricing information in-store and online and the use of promotion, were highlighted in their July 2023 report.

The CMA identified problems with unit pricing that may affect consumers’ ability to compare products, and made recommendations to government to reform the Price Marking Order 2004 (PMO). The government consultation on these reforms has now ended and the government will be considering these responses. The CMA will continue to work closely with Government with a view to reform of the PMO.

The CMA are also undertaking a further review of compliance by certain variety store retailers with the PMO. This involves in-store and online checks to assess whether these stores are displaying unit prices correctly and consistently. Based on these checks, the CMA will consider whether further action, including enforcement, is needed and will provide an update on this work in Spring 2024. A public campaign to raise awareness will be launched in January 2024

Loyalty Schemes

The CMA plans to begin a review of the use of loyalty scheme pricing by supermarkets in early 2024. The CMA’s work will consider how the growth in loyalty scheme pricing is affecting consumers and competition in the groceries sector.

For any queries on competition matters please contact Kate Newman on [email protected] 

Our content explained

Every piece of content we create is correct on the date it’s published but please don’t rely on it as legal advice. If you’d like to speak to us about your own legal requirements, please contact one of our expert lawyers.

Posted by


Mills & Reeve Sites navigation
A tabbed collection of Mills & Reeve sites.
My Mills & Reeve navigation
Subscribe to, or manage your My Mills & Reeve account.
My M&R


Register for My M&R to stay up-to-date with legal news and events, create brochures and bookmark pages.

Existing clients

Log in to your client extranet for free matter information, know-how and documents.


Mills & Reeve system for employees.