ISLANDERS are paying a third more for their groceries than those shopping in the cheapest UK supermarkets, a new report has revealed.
And the average shopping basket will cost 12% more in a Jersey store than it would from the same retailer in the UK, according to the Jersey Competition Regulatory Authority.
The authority’s Groceries Market Study, which was published yesterday and which also found that Islanders were spending an average of £112 per week on groceries, said that competition among the Island’s supermarkets was working.
Grocery retailers were not making excessive profits and consumers were shopping around, according to the JCRA, while no retailer had more than a 40% share of the market.
There were, however, ‘mixed levels’ of satisfaction from Islanders with the Island’s grocery market, with consumers explicitly calling for a ‘discounter’ to enter the market. This lack of satisfaction was, in part, driven by comparisons with the UK, which consumers felt offered better value and better quality than Jersey, according to a survey.
Jersey Consumer Council chair Carl Walker said ‘budget shops’, such as an Aldi or Lidl, ‘would certainly shake things up’.
Mr Walker added: ‘A discounter would be welcomed and very popular. I’m sure there are ways the government could assist, encourage or simplify the process for one of these to move to Jersey. But you have to be mindful of existing supermarkets and their employees. It’s a fine balance.’
Inflation has hit its highest rate (12.7%) in Jersey for 30 years, with increasing food prices driving this by 14.2% in the year to December 2022, impacting households’ budgets.
The authority found that discrepancies in price between Jersey and the UK stemmed from higher operating costs in the Island, primarily driven by freight and labour, rather than a lack of competition.
It costs approximately 10% more for grocery retailers to operate in Jersey, which can be broken down into 3% labour, 7% distribution and 2% sales tax difference.
The study found that a higher minimum wage and cost of living (notably from housing), plus a tight labour market necessitating higher wages, heaped costs on retailers that were ultimately passed onto consumers.
The report stated: ‘Jersey grocery retailers are not making “excess” profits, which means they will have had little choice but to pass on the considerable inflation in wholesale costs to consumers.’
GST – a 5% sales tax – also contributed to the price difference between UK and Jersey supermarkets, as most groceries in the UK – unless they are classed as junk food – in the UK are exempt from the 20% VAT.
In November 2022, a proposition from Deputy Raluca Kovacs to remove GST from food was rejected by the States Assembly.
The JCRA’s report makes three recommendations.
The first is to improve price transparency by investing in the Jersey Consumer Council’s price comparison service, to encourage greater price-based competition.
Mr Walker said: ‘While it is more expensive to operate here, there is still sufficient competition although there is a lack of the very low-cost supermarkets.’
He added that shopping around was ‘key’ to driving savings, saying: ‘It’s important to look at people’s shopping habits, moving away from that one big shop.’
The second recommendation is to minimise entry barriers, such as planning restrictions, and ‘promote Jersey as a test-bed for innovation’.
The report also found that there were ‘inherent barriers to entering a small, island market’, that most store sites were occupied and that there were logistical challenges to supplying an island market.
The third recommendation is to reduce freight and labour cost by following up the 2021 market study into freight logistics. Stakeholders now have the opportunity to comment and provide further input to the study before it is finalised in autumn 2023.
KEY FIGURES
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33% – the price difference of a shopping basket between Jersey and the cheapest UK grocery retailers.
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9% – of a household’s total weekly spend is on groceries, going up to 15% for low-income households.
