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Food inflation edges higher as energy and freight costs begin to hit supermarket prices
At a glance
- •City AM tracked ~200 grocery prices across Tesco, Sainsburys and Waitrose and found a 1.4% average monthonmonth price rise in June.
- •The war in Iran and closure of the Strait of Hormuz have pushed up freight, oil and fertiliser costs, feeding into inflation expectations.
- •OECD economists forecast UK inflation could peak at 3.7% later this year; food inflation may exceed that due to sensitivity to energy and trade shocks.
- •Waitrose showed the broadest price adjustments: almost 40% of sampled items rose, and over 70% changed price since May.
- •Staples like broccoli, tomatoes, canned chickpeas, cooking oil and beef mince fell in price; dairy was broadly unchanged.
- •Alcoholic drinks were a major source of increases (gin up ~10%, premium tonic up ~9%), while wine saw discounts.
- •Divergent pricing strategies are visible across supermarkets, with loyalty and promotional pricing affecting apparent listprice movements.
Market snapshot
Supermarket food inflation rose for the first time this year, according to a City AM analysis, offering an early warning that the surge in energy and freight costs sparked by the war in Iran is starting to feed through to UK grocery shelves.
City AM reporters track about 200 product prices across three major supermarkets Tesco, Sainsburys and Waitrose at the start of each month. The latest sample shows average prices climbed 1.4% monthonmonth in June, after being largely unchanged in May. While the dataset is smaller than official surveys used by institutions such as the Bank of England, it provides a timely glimpse of cost pressures that could intensify over the summer.
What is driving the change
The conflict in Iran, and a temporary closure of the Strait of Hormuz that followed, has pushed up global freight costs and reduced supplies of oil and fertiliser. Those disruptions have lifted inflation expectations and altered market forecasts: where economists and markets had been pencilling in central bank rate cuts in the second half of 2026, some now expect rates to be held higher for longer or even to rise.
The OECD has warned that UK inflation may peak at about 3.7% later this year. Food prices are particularly sensitive to energy and trade shocks, suggesting headline food inflation could be even higher than that headline figure.
Policy responses were discussed at the highest levels: in May Chancellor Rachel Reeves reportedly considered supermarket price caps for a range of essential foods, a proposal that was subsequently dropped after pushback from supermarket executives and economists. Bank of England governor Andrew Bailey told MPs that centrally controlling household-essential prices is not a sustainable thing in the long run because it would artificially mov[e] prices relative to costs.
How supermarkets are reacting
Among the three chains in City AMs survey, Waitrose recorded the steepest monthonmonth rise: almost 40% of the Waitrose products sampled were more expensive in June than in May. By comparison, just under 20% of items at Tesco and around 10% at Sainsburys rose over the same period. That said, price movements at Waitrose were more volatile: roughly a third of items at Waitrose fell in price monthonmonth, compared with a quarter at Tesco and only 6% at Sainsburys.
Some staples bucked the inflation trend. Broccoli, tomatoes, canned chickpeas, cooking oil and beef mince were cheaper monthonmonth in most or all of the supermarkets sampled, while dairy items such as milk, cream and cheese were broadly unchanged.
Alcoholic drinks drove many of the upward price moves: gin rose by about 10% on average across the three chains, and premium tonic water was up roughly 9%. Wine experienced some discounting, limiting price rises in that category.
Waitrose appears to be adopting a differentiated strategy: raising prices on storecupboard staples while promoting lowerpriced treats to attract shoppers. Since May the employeeowned retailer has increased prices on items including Heinz ketchup, Colmans mustard, Pip & Nut peanut butter, Rowse squeezy honey and Tabasco sauce, while offering steep discounts on indulgences such as Lindt chocolate, Tonys Chocolonely, Candy Kittens and Kettle chips.
The meat aisle showed particularly large divergences between chains. A beef roasting joint was about 5% cheaper at Tesco monthonmonth but 20% more expensive at Waitrose. Chicken breasts per kilo fell nearly 25% at Waitrose while jumping 9% at Sainsburys.
Overall, Waitrose adjusted prices on more than 70% of the products surveyed since May, compared with 43% at Tesco and 16% at Sainsburys. Part of that gap reflects more frequent use of loyalty and promotional pricing by Tesco and Sainsburys, which can mask listprice increases.
Outlook
The June uptick in supermarket food prices is an early signal rather than definitive proof of a broad, sustained food inflation wave. But with elevated freight costs and constrained energy and fertiliser supplies, the risk of further price increases for food remains real. Households and policymakers will be watching the coming months closely to see whether the trend seen in this small but timely dataset becomes a more persistent driver of UK inflation.
