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Tesco boss says consumers ‘terrified’ about volatile impact of inflation

Cork-born Ken Murphy says food market is ‘inflating in the past four weeks by 8 to 9pc’

Tesco Group CEO Ken Murphy

Caoimhe Gordon

June 24 2022 02:30 AM

Tesco, which made operating profits of £2.48bn (€2.88bn) in the UK and Ireland in its last financial year, says inflation is having effects that are “deeply unreliable, volatile and quite scary”.

The supermarket giant’s Cork-born CEO Ken Murphy told the Consumer Goods Forum Global Summit in Dublin yesterday that Tesco has conducted research across all their markets to gauge consumer response to the cost-of-living crisis

“More than 75pc of people are terrified about inflation and the effect it might have on their lives,” he added.

In response to ongoing challenges, he said the grocer had moved away from its typical high-low promotional calendar and instead are opting for an “every day low value model.” He said the grocer now matches the prices of 600 lines to Aldi in the UK, “with even more in Ireland”.

When asked if prices have risen in-store, Mr Murphy replied that “the food market is inflating, it’s inflating in the past four weeks by 8 to 9pc”.

Tesco has also noted that since the pandemic, consumers are now making more regular trips in-store with smaller basket sizes.

Last week, the UK’s leading grocer published its first-quarter results which illustrated, for the first time, inflation’s impact on consumer behaviour. For the 13 weeks ended May 28, Tesco’s sales in Ireland dipped by 2.4pc.

In a trading statement, Tesco reported sales of £612m (€715m) in the Republic of Ireland across the 13 weeks ended May 28. However, this was 10.1pc higher than the grocer’s first quarter here in 2019.

The grocer said that the decrease in sales could be attributed to a strong trading performance over lockdown but this decline is now partially offset by inflation.

Mr Murphy predicts that if countries experience an economic downturn, consumers will ditch healthy habits.

“There’s historical evidence that when an economy goes into recession, people’s comfort food eating goes up, takeaway eating goes up,” Mr Murphy said. “People stop eating out, people stop going on holidays and they are looking for cheaper substitutes.

“The challenge for the industry is how do you give people comfort without going backwards on healthy eating?” he asked.

For both health and sustainable reasons, Tesco is encouraging consumers to eat more fresh food and vegetables, which Mr Murphy describes as “probably the cheapest products we carry in our stores”.

He also called on consumers to change habits around food waste.

“The vast of majority of waste occurs in the home, which is about 70pc of all food waste,” he said.

In order to tackle consumer food waste, Tesco is working to increase the life of fresh produce. “You’re giving the consumer that extra essential day,” he said.

According to Mr Murphy, this can be achieved through strong relationships with suppliers rather than pushing sell-by dates forwards. “We’re not pushing it from a risk perspective, we are reducing supply chain time from farm to fork,” he said.

To reduce waste, UK grocer Morrisons removed use-by dates on 90pc of its milk in January.

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Tesco boss says consumers ‘terrified’ about volatile impact of inflation

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