London Daily

Focus on the big picture.
Thursday, Aug 28, 2025

Savings and algorithms: UK supermarkets battle cost of living crisis

Savings and algorithms: UK supermarkets battle cost of living crisis

Facing the toughest economic conditions in decades, Britain's supermarkets are cutting product ranges, searching for cost savings and patrolling each other's stores to check prices and products as they try to stay one step ahead.

Like retailers across the world, UK grocers including market leader Tesco (TSCO.L) and No. 2 Sainsbury's (SBRY.L) are struggling with the soaring cost of supplies, a shortage of key products and workers, and cash-strapped consumers.

But they enter the downturn on the back of an already lengthy period of cost cutting due to fierce competition, forcing them to look for new ways to make savings while increasingly using data to predict customer reactions to change.

"I spend a lot of time in our competitors' (stores), all of the team do too, we're constantly looking at what they're doing," Sainsbury's CEO Simon Roberts told Reuters.

While passing on some price rises to customers and taking a hit to profit margins themselves, supermarkets are fighting to limit the pain for consumers on their most important lines, like fresh fruit and vegetables, meat, fish and poultry.

"They'll all be looking at their relative performance and their relative price position like never before, because that's in the end what counts, their relative position to everybody else on price," said one grocery industry veteran, speaking on condition of anonymity.

Tesco and Sainsbury's are both matching prices on key items with German-owned discounter Aldi, seen as the low-price benchmark.

Prices are rising after the war in Ukraine restricted supplies of sunflower oil and boosted wheat and animal feed prices - pushing up the cost of meat, dairy and bakery products. Soaring energy and fuel prices, as well as increased labour and transport costs, have added to the mix.

UK grocery inflation hit 8.3% in June, a 13-year high, according to market researcher Kantar, forcing shoppers to cut back and buy cheaper ranges. U.S. bank Citi said UK food price inflation could hit 20% early next year.

RANGES


One focus for supermarkets is reducing the range of products they offer, with their ability to sell multiple types of, for example, olive oil, beans or toilet roll no longer seen as a priority for customers.

While supermarkets sought simplification before, the quest for new savings means they are attacking it with renewed vigour, as focusing their buying power allows them to get better terms.

In the last year, Tesco reduced the number of lines it sold of dairy alternatives, such as oat and almond milk, by 47%, leading to a 4% improvement in availability in retained lines.

Similarly, a 19% reduction in the amount of yoghurt lines led to an 11% improvement in availability.

Privately-owned Asda said it reduced its food range by 12.5% last year, primarily by removing duplicate products. However, the introduction of more budget products meant its range has increased by 2.5% this year.

The approach fits with steps taken by French food giant Danone (DANO.PA), the world's biggest yoghurt maker, which is cutting the variety of products it sells, including the number of flavours and packaging size options.

"If you halve your range in an area then the half that you've got left instantly becomes twice as fast selling on average, assuming you haven't lost a customer on what you've discontinued," said the grocery industry veteran.

"And if you're moving from two suppliers to one supplier then your terms with that supplier can improve dramatically."

ALGORITHMS


Supermarkets can reduce ranges more effectively than in the past by using customer data and analytics to predict whether shoppers will accept an alternative brand or not.

"The role that algorithms play now in understanding the commercial model is super important," said Sainsbury's Roberts.

"We've got some more innovation but also we've trimmed certain categories as well," he said.

With Britain's supermarkets operating on margins of only around 3%, they also need to make savings across the business.

"If we're going to invest 500 million pounds on bringing prices down, or 100 million pounds this year, 200 million pounds over two years, investing in colleagues, then we have to find efficiencies," said Roberts.

Market-leader Tesco has leveraged highly publicised price matching offers and a popular "Clubcard Prices" loyalty scheme to agree good terms with suppliers, enabling it to ensure that where it has to raise prices it tries "to ensure it is a little bit less and a little bit later than the rest of the market," it says.

But tensions with some suppliers are rising. On Wednesday, U.S. food giant Kraft Heinz (KHC.O) stopped supplying some products to Tesco after the grocer resisted higher prices.

While, like Sainsbury's, Tesco has warned of a hit to profits this year, industry data shows it is consistently outperforming rivals on a sales value basis, along with discounters Aldi and Lidl.

"Our ambition is to outperform the market, we can't control the environment, which of course remains incredibly challenged and frankly looks like it's getting more challenging," CEO Ken Murphy said.

Newsletter

Related Articles

0:00
0:00
Close
Bruce Willis Relocated Due to Advanced Dementia
French and Korean Nuclear Majors Clash As EU Launches Foreign Subsidy Probe
EU Stands Firm on Digital Rules as Trump Warns of Retaliation
Getting Ready for the 3rd Time in Its History, Germany Approves Voluntary Military Service for Teenagers
Argentine President Javier Milei Evacuated After Stones Thrown During Campaign Event
Denmark Confronts U.S. Diplomat Over Covert Trump-Linked Influence in Greenland
Starmer Should Back Away from ECHR, Says Jack Straw
Trump Demands RICO Charges Against George Soros and Son for Funding Violent Protests
Taylor Swift Announces Engagement to NFL Star Travis Kelce
France May Need IMF Bailout, Warns Finance Minister
Chinese AI Chipmaker Cambricon Posts Record Profit as Beijing Pushes Pivot from Nvidia
After the Shock of Defeat, Iranians Yearn for Change
Ukraine Finally Allows Young Men Aged Eighteen to Twenty-Two to Leave the Country
The Porn Remains, Privacy Disappears: How Britain Broke the Internet in Ten Days
YouTube Altered Content by Artificial Intelligence – Without Permission
Welcome to The Definition of Insanity: Germany Edition
Just a reminder, this is Michael Jackson's daughter, Paris.
Spotify’s Strange Move: The Feature Nobody Asked For – Returns
Manhunt in Australia: Armed Anti-Government Suspect Kills Police Officers Sent to Arrest Him
China Launches World’s Most Powerful Neutrino Detector
How Beijing-Linked Networks Shape Elections in New York City
Ukrainian Refugee Iryna Zarutska Fled War To US, Stabbed To Death
Elon Musk Sues Apple and OpenAI Over Alleged App Store Monopoly
2 Australian Police Shot Dead In Encounter In Rural Victoria State
Vietnam Evacuates Hundreds of Thousands as Typhoon Kajiki Strikes; China’s Sanya Shuts Down
UK Government Delays Decision on China’s Proposed London Embassy Amid Concerns Over Redacted Plans
A 150-Year Tradition to Be Abolished? Uproar Over the Popular Central Park Attraction
A new faith called Robotheism claims artificial intelligence isn’t just smart but actually God itself
Deputy Prime Minister Angela Rayner Purchases Third Property Amid Housing Tax Reforms Debate
HSBC Switzerland Ends Relationships with Over 1,000 Clients from Saudi Arabia, Lebanon, Qatar, and Egypt
Sharia Law Made Legally Binding in Austria Despite Warnings Over 'Incompatible' Values
Italian Facebook Group Sharing Intimate Images Without Consent Shut Down Amid Police Investigation
Dutch Foreign Minister Resigns Amid Deadlock Over Israel Sanctions
Trump and Allies Send Messages of Support to Ukraine on Independence Day Amid Ongoing Conflict
China Reels as Telegram Chat Group Shares Hidden-Camera Footage of Women and Children
Sam Nicoresti becomes first transgender comedian to win Edinburgh Comedy Award
Builders uncover historic human remains in Lancashire house renovation
Australia Wants to Tax Your Empty Bedrooms
MotoGP Cameraman Narrowly Avoids Pedro Acosta Crash at Hungarian Grand Prix
FBI Investigates John Bolton Over Classified Documents in High-Profile Raids
Report reveals OpenAI pitched national ChatGPT Plus subscription to UK ministers
Labour set to freeze income tax thresholds in long-term 'stealth' tax raid
Coca‑Cola explores sale of Costa coffee chain
Trial hears dog walker was chased and fatally stabbed by trio
Restaurateur resigns from government hospitality council over tax criticism
Spanish City funfair shut after serious ride injury
Suspected arson at Ilford restaurant leaves three in critical condition
Tottenham beat Manchester City to go top of Premier League
Bank holiday heatwave to hit 30°C before remnants of Hurricane Erin arrive
UK to deploy immigration advisers to West Africa to block fake visas
×