British grocery inflation climbed to 4.1% in the four weeks to 18 May, the highest level in over a year, according to new figures from market researcher Kantar.
The uptick reflects increased labour costs for supermarkets, following April’s national minimum wage hike and rising payroll taxes.
While some categories like pet food saw falling prices, the cost of everyday staples such as butter, spreads, and confectionery surged, further tightening consumer budgets.
This marks the highest grocery inflation since February 2023 and compares to the previous month’s 3.8% figure.
As inflation nears the 5% level predicted by the Institute of Grocery Distribution for 2025, price-sensitive households are being forced to modify their spending habits to cope with the cumulative impact of high energy bills, housing costs, and now, food.
Supermarket sales rise 4.4% as shoppers react to price hikes
Despite the inflationary pressure, total grocery sales rose by 4.4% year-on-year in the latest four-week period.
This suggests that while price increases are being felt at the till, overall consumer demand remains steady, helped in part by behaviour changes such as switching to cheaper private labels, bulk buying, and shopping more frequently at discount chains.
According to Kantar, the most significant price rises were recorded in chocolate confectionery and suncare products, as warmer weather drove up demand. Butter and spreads also posted sharp increases.
On the other end, prices fell most in pet food and household paper products, offering some respite to consumers.
The behavioural tipping point appears to be when inflation exceeds 3% to 4%, with noticeable changes in how consumers budget and plan their weekly shops.
Kantar’s head of retail and consumer insight, Fraser McKevitt, noted that once that threshold is crossed, wallet-conscious shoppers tend to take more deliberate steps to manage spending.
Aldi, Lidl, and Ocado outperform as price-savvy consumers shift habits
Discount supermarkets continued to outperform the broader sector, with Aldi and Lidl achieving a combined sales growth of 8.4%—their strongest since January 2024.
This indicates that more shoppers are turning to discounters for better value as inflation persists.
Online grocery retailer Ocado was once again the fastest-growing supermarket in Britain, posting a 14.9% increase in year-on-year sales.
Ocado’s success underscores a broader trend towards digital grocery shopping, with convenience and access to competitive pricing attracting a larger share of the market.
Meanwhile, Marks & Spencer managed a 12.3% rise in sales over the same period, despite suffering a cyberattack that disrupted operations.
This suggests that strong brand loyalty and strategic food innovation helped M&S maintain customer engagement even in difficult circumstances.
Tesco leads the big four, while Asda continues to lose ground
Among the traditional ‘big four’ grocers, Tesco posted the strongest sales performance with a 5.9% year-on-year increase over the 12 weeks to 18 May.
Sainsbury’s followed closely behind with a 4.7% rise. Both supermarkets have invested in value-led campaigns and loyalty programmes to keep customers amid inflationary pressure.
Asda, however, continued to underperform. The supermarket’s sales dropped 3.2% during the same period, leading to a 90 basis point loss in market share compared to last year.
While this was its best showing since May 2023, the figures suggest it is still struggling to keep pace with competitors.
As inflationary pressures persist into the second half of 2025, analysts expect further shifts in shopper behaviour, especially if food prices approach or exceed 5%.
Supermarkets will likely respond with increased promotional activity and private-label expansion to retain footfall in an increasingly cost-sensitive market.
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