Saudi Press

Saudi Arabia and the world
Friday, Aug 15, 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

Saudi Press
0:00
0:00
Close
Iranian Protection Offers Chinese Vehicle Shipments a Cost Advantage over Japanese and Korean Makers
Saudi Arabia accelerates renewables to curb domestic oil use
Cristiano Ronaldo and Georgina Rodríguez announce engagement
Asia-Pacific dominates world’s busiest flight routes, with South Korea’s Jeju–Seoul corridor leading global rankings
Private Welsh island with 19th-century fort listed for sale at over £3 million
Sam Altman challenges Elon Musk with plans for Neuralink rival
Australia to Recognize the State of Palestine at UN Assembly
The Collapse of the Programmer Dream: AI Experts Now the Real High-Earners
Armenia and Azerbaijan to Sign US-Brokered Framework Agreement for Nakhchivan Corridor
British Labour Government Utilizes Counter-Terrorism Tools for Social Media Monitoring Against Legitimate Critics
WhatsApp Deletes 6.8 Million Scam Accounts Amid Rising Global Fraud
Nine people have been hospitalized and dozens of salmonella cases have been reported after an outbreak of infections linked to certain brands of pistachios and pistachio-containing products, according to the Public Health Agency of Canada
Texas Residents Face Water Restrictions While AI Data Centers Consume Millions of Gallons
Tariffs, AI, and the Shifting U.S. Macro Landscape: Navigating a New Economic Regime
India Rejects U.S. Tariff Threat, Defends Russian Oil Purchases
United States Establishes Strategic Bitcoin Reserve and Digital Asset Stockpile
Thousands of Private ChatGPT Conversations Accidentally Indexed by Google
China Tightens Mineral Controls, Curtailing Critical Inputs for Western Defence Contractors
OpenAI’s Bold Bet: Teaching AI to Think, Not Just Chat
BP’s Largest Oil and Gas Find in 25 Years Uncovered Offshore Brazil
JPMorgan and Coinbase Unveil Partnership to Let Chase Cardholders Buy Crypto Directly
British Tourist Dies Following Hair Transplant in Turkey, Police Investigate
WhatsApp Users Targeted in New Scam Involving Account Takeovers
Trump Deploys Nuclear Submarines After Threats from Former Russian President Medvedev
Germany’s Economic Breakdown and the Return of Militarization: From Industrial Collapse to a New Offensive Strategy
IMF Upgrades Global Growth Forecast as Weaker Dollar Supports Outlook
Politics is a good business: Barack Obama’s Reported Net Worth Growth, 1990–2025
"Crazy Thing": OpenAI's Sam Altman Warns Of AI Voice Fraud Crisis In Banking
Japanese Prime Minister Vows to Stay After Coalition Loses Upper House Majority
President Trump Diagnosed with Chronic Venous Insufficiency After Leg Swelling
Man Dies After Being Pulled Into MRI Machine Due to Metal Chain in New York Clinic
FIFA Pressured to Rethink World Cup Calendar Due to Climate Change
"Can You Hit Moscow?" Trump Asked Zelensky To Make Putin "Feel The Pain"
Nvidia Becomes World’s First Four‑Trillion‑Dollar Company Amid AI Boom
Iranian President Reportedly Injured During Israeli Strike on Secret Facility
Kurdistan Workers Party Takes Symbolic Step Towards Peace in Northern Iraq
BRICS Expands Membership with Indonesia and Ten New Partner Countries
Elon Musk Founds a Party Following a Poll on X: "You Wanted It – You Got It!"
AI Raises Alarms Over Long-Term Job Security
Saudi Arabia Maintains Ties with Iran Despite Israel Conflict
Russia Formally Recognizes Taliban Government in Afghanistan
Mediators Edge Closer to Israel-Hamas Ceasefire Agreement
Emirates Airline Expands Market Share with New $20 Million Campaign
House Oversight Committee Subpoenas Former Jill Biden Aide Amid Investigation into Alleged Concealment of President Biden's Cognitive Health
Amazon Reaches Major Automation Milestone with Over One Million Robots
Meta Announces Formation of Ambitious AI Unit, Meta Superintelligence Labs
China Unveils Miniature Insect-Like Surveillance Drone
Marc Marquez Claims Victory at Dutch Grand Prix Amidst Family Misfortune
Iran Executes Alleged Israeli Spies and Arrests Hundreds Amid Post-War Crackdown
Trump Asserts Readiness for Further Strikes on Iran Amid Nuclear Tensions
×