Saudi Press

Saudi Arabia and the world
Friday, Feb 27, 2026

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
Asian LPG Prices Surge After Damage Forces Saudi Aramco Export Disruptions
Saudi Arabia Unveils $100 Billion AI Infrastructure Fund to Challenge US and China
Saudi Stocks Close Lower as Tadawul All Share Index Falls 1.28 Percent
Saudi Arabia Launches Smart Mapping System to Enhance Pilgrim Experience at Holy Sites
Cristiano Ronaldo Acquires 25 Percent Stake in Saudi-Owned Spanish Club Almería
U.S.–Saudi Relations Balance Transactional Deal-Making with Expanding Strategic Ambitions
Israel’s President Herzog Signals Cautious Message on Saudi Ties at UAE Iftar in Tel Aviv
United States and Saudi Arabia Strengthen Security Ties with Joint Explosive Ordnance Disposal Exercise
Saudi Arabia Responds to Israel–UAE Moves in Somalia as Regional Rivalries Intensify
Saudi Arabia Showcases Expanding Defense Ambitions at World Defense Show 2026
SECRETARY RUBIO on IRAN: Iran poses a very great threat to the United States, and has for a very long time.
Larry Summers, the former U.S. Treasury Secretary, is resigning from Harvard University as fallout continues over his ties to Jeffrey Epstein.
U.S. stocks ended higher on Wednesday, with the Dow gaining about six-tenths of a percent, the S&P 500 adding eight-tenths of a percent, and the tech-heavy Nasdaq climbing roughly one-and-a-quarter percent.
Nvidia posted better than expected results for the January quarter on Wednesday and forecast current quarter revenue above market estimates.
Saudi Arabia’s Coffee Renaissance Gains Momentum as Investment and Heritage Drive Industry Growth
Saudi Shipping Leader Bahri Expands Fleet as Tanker Rates Approach $200,000 a Day
Saudi Arabia Advances First National Urban Policy Through High-Level Leadership and Institutional Alliances
Major Life Sciences Summits to Spotlight Saudi Arabia’s Rise as Regional Biotech and Pharma Hub
Saudi Arabia Reframes Red Sea and Horn of Africa Strategy Amid Rising Security and Trade Stakes
Saudi Arabia Recalibrates Its Role in Shifting Regional and Global Power Dynamics
Saudi Retail Signals to Global Brands: Localise or Lose Ground in a Rapidly Evolving Market
Saudi Arabia Looks to Human Capital Investment to Unlock Demographic Dividend
Saudi Arabia and Iran Increase Oil Exports Amid Escalating Middle East Tensions
Saudi Data Protection Authority Intensifies Enforcement Under Personal Data Law
Saudi Arabia Raises Oil Output and Exports Amid Contingency Planning Over Iran Tensions
USS Gerald R Ford Arrives in Souda, Crete
Saudi Sovereign Wealth Fund Unit Expands Push Into Global Private Credit
Saudi Arabia Eases Headquarters Rules to Attract More Foreign Firms
Saipem Secures Major Offshore Pipeline Contract in Saudi Arabia
Saudi Arabia’s Targeted Oil Export Cuts to the US Seen as Strategic Signal Amid Global Supply Glut
Nemetschek Arabia Signs Strategic MoU with Saudi Facility Management Association
Gulf Markets Close Mixed as Saudi Shares Slip on Budget Deficit Concerns
Saudi Arabia Posts Largest Quarterly Budget Deficit in Years Amid Weaker Oil Revenues and Higher Spending
U.S. Lawmaker Urges Safeguards on Saudi Civil Nuclear Deal as Trump Administration Advances Agreement
Saudi Arabia and Gulf Allies Rally Behind Kuwait in Escalating Maritime Border Dispute with Iraq
Universal Aviation Secures License to Operate and Manage New General Aviation Terminal in Dammam
Tucker Carlson’s Saudi Arabia Remarks Spark Debate Over Israel Stance
GCC Secretary-General Holds Talks with EU Ambassador in Riyadh
Gulf States’ AI Investment Drive Seen as Strategic Bet on Technology and U.S. Security Ties
African Union Commission Chair Meets Saudi Vice Foreign Minister to Deepen Strategic Cooperation
President El-Sisi Holds Strategic Talks with Saudi Crown Prince in Riyadh
Lucid Unveils Up to $12,000 Incentive for Air and Gravity Models in Saudi Arabia
Saudi Arabia Enters Global AI Partnership, Expanding Its Role in International Technology Governance
Saudi Arabia’s Landmark U.S. LNG Agreement Signals Major Strategic Shift
Saudi Arabia Accelerates Global Gaming Push with Billion-Dollar Deals and Expanded PIF Mandate
Saudi Arabia Reports $25.28 Billion Budget Deficit in Fourth Quarter of 2025
Alvarez & Marsal Tax Establishes Dedicated Pillar Two and Transfer Pricing Team in Saudi Arabia
United States Approves Over Fifteen Billion Dollars in Major Arms Sales to Israel and Saudi Arabia
Pre-Iftar Walks Gain Momentum as Ramadan Wellness Trend Spreads
Middle East Jackup Rig Fleet Contracts Further After Saudi Drilling Suspensions
×