Brexit 'Pressure' On Prices - Grocery Boss

The boss of online grocer Ocado has warned that the plunge in the value of the pound could lead to rising prices for shoppers.

Tim Steiner suggested that the weaker pound may lead to "inflationary pressure" - given increased import costs for stores as a consequence of sterling's weakening since the EU referendum.

The pound reached a 31-year low against the US dollar on Monday and is down significantly against many major currencies.

He made his remarks against a backdrop of shop price deflation - a scenario that arose in mid-2014 amid the price war between rival chains at a time of low inflation in the UK economy.

Industry figures for June released by Kantar Worldpanel on Monday showed grocery prices down 1.4% on a year earlier.

Its head of retail, Fraser McKevitt, said: "With an estimated 40% of the food we consume sourced from overseas, any long-term change in exchange rates may threaten the current period of cheaper groceries.

"Historically, higher prices have led to consumers looking for less expensive alternatives such as own-label products, seeking out brands on promotion or visiting cheaper retailers".

While he did not expect to see sales tail off in the coming months as a result of the Brexit vote, Kantar did report further progress for discounters in the current market as they continue to pressure the so-called 'big four' chains for market share.

Mike Watkins, UK head of retail for Nielsen (EUREX: 11400372.EX - news) , said: "We can expect some change in consumer sentiment and, possibly, a return to low inflation next year – should sterling’s depreciation continue and global commodity prices strengthen.

"However, for now, the battle for market share continues and shoppers will benefit from falling prices at food retailers due to price cuts and the deflationary environment".

Ocado echoed those sentiments at the same time as revealing its own half-year results.

Mr Steiner said: "We don't believe Brexit will have a significant impact on the business, but we're waiting to see what happens to pricing."

The company pointed to "significant challenges" remaining in the sector amid a 5.7% increase in underlying pre-tax profits to £40.4m for the six months to 15 May.

That compares to growth of 11.4% a year earlier, though retail sales rose 14%.

Mr Steiner said the group had seen "absolutely no impact whatsoever" yet from the launch of AmazonFresh but added the firm was "keeping a close eye" on the new competition.