Tesco cuts price of milk for first time since 2020

Tesco has cut the price of milk for the first time since May 2020, a possible early sign that a surge in food inflation may abate in the coming months.

In March, grocery inflation rose to a record 17.5 per cent, according to market researcher Kantar, with prices rising fastest for products such as milk, cheese and eggs. Overall UK inflation for food and non-alcoholic drinks was 18 per cent in February, the highest since 1977, according to official data.

Tesco, which has a 27 per cent share of Britain’s grocery market, said on Wednesday (12) it was reducing the price of a four-pint carton of milk from 1.65 pounds to 1.55 pounds, two pints from 1.30 pounds to 1.25 pounds and a pint from 95 pence to 90 pence.

“We’ve seen some cost price deflation for milk across the market in recent times, and we want to take this opportunity to pass that reduction on to customers,” Tesco UK CEO Jason Tarry said.

He said the price cut would not affect the price Tesco pays its milk farmers.

Tesco also said it was “locking in” prices on over 1,000 everyday products until July 5, including Yorkshire Tea, McCain oven chips, Shredded Wheat, Kenco instant coffee and Aquafresh toothpaste.

Overall UK consumer price inflation ran at 10.4 per cent in February, official data showed, pushed up by higher food and drink prices in pubs and restaurants.

The Bank of England forecasts it will fall sharply during the current quarter, dropping to below 4 per cent by the end of this year.

Earlier today (13), Tesco reported halving of annual net profit as soaring inflation hiked costs and reduced the amount it sold. Profit after tax dropped to £745 million in the 12 months to the end of February, Tesco said in a statement.

Chief executive Ken Murphy said the group experienced “unprecedented levels of inflation in the prices” it paid suppliers. The supermarket added that sales volumes dropped year-on-year.

Tesco said it expected inflation to continue through the next six months at least, but the level would moderate, led by falling prices in categories including oils and grains.

“We’re expecting inflation to continue certainly through the first half of the year,” Murphy told reporters. “But we are expecting it to moderate as we lap last year’s inflation.”

The grocer said it recognised the pressures its suppliers were facing from rising costs but it was not afraid to have “direct conversations” about delivering value for its customers.