Why essentials like eggs, bread and milk cost so much more now

For many consumers, purchasing the same supermarket staples on a weekly basis has been a longtime routine. However, shoppers have undoubtedly noticed increases in their total expenditures at checkout, even when opting to forgo more indulgent items such as wine or biscuits.

A comprehensive examination reveals the extent of cost increases for everyday essentials like milk, bread, and eggs, along with the underlying factors driving these price hikes, as well as the implications for profit margins.

What's happening to the price of eggs?

In 2022, consumers could buy a box of six supermarket own brand free-range eggs for just £1. Today, that same box is priced at £1.80, as reported by market researchers Assosia, who analyzed prices across major retailers such as Tesco, Sainsbury's, Asda, and Morrisons for the BBC.

The surge in egg prices can largely be attributed to the culling of millions of hens due to the UK's most severe avian flu outbreak from 2021 to 2023. This drastic reduction in the number of laying hens, combined with increased energy costs associated with keeping the remaining birds indoors due to health restrictions, resulted in significant shortages.

Consequently, supermarkets implemented purchasing limits for eggs per customer, and both producers and retailers raised prices to mitigate their financial losses. A substantial portion of egg production costs stem from expenses for grain, heating facilities, and transportation.

Ukraine serves as a significant supplier of grain, and costs surged following Russia's large-scale invasion in 2022. This conflict also exacerbated energy prices, a situation we are witnessing again in light of ongoing tensions in the Middle East.

Despite ongoing price pressures, demand for eggs remains robust, driven by the popularity of high-protein diets.

Milk uses a lot of energy

The price of another staple, milk, has risen from £1.29 for four pints of semi-skimmed in 2022 to £1.65 today, based on Assosia's analysis of budget supermarket ranges.

The dairy production process involves substantial energy requirements for milking, processing, and transportation. Therefore, energy price increases linked to the Ukraine conflict have significantly impacted the industry, contributing to higher milk prices.

After an initial spike, milk price increases subsided in subsequent years due to a global oversupply. According to agricultural analysts at The Andersons Centre, dairy farmers are currently receiving about 25% less for each liter of milk, with many operating at a loss.

While producers are responsible for ensuring that supermarket shelves remain stocked with eggs, milk, and bread, their costs have escalated at rates exceeding inflation over the past year. Data from the Office for National Statistics (ONS) indicates that producer costs for materials and goods rose by 7.7% in the year leading up to April, marking the largest increase in over three years.

In contrast, factory gate prices—the rates producers charge retailers and wholesalers—only increased by 4% during the same period. Danni Hewson, head of financial analysis at AJ Bell, indicates that contracts between producers and supermarkets are generally established well in advance.

"As such, producers and farmers cannot predict fluctuating costs at the time contracts are signed," she says. "While this allows for potential price increases during contract renewals, such adjustments usually cannot be made mid-contract amid soaring energy or fuel prices. Consequently, some of these cost increases must inevitably be absorbed by the producers."

Bread prices level out after Ukraine war

The average price of a basic medium slice white bread loaf stood at 65p in 2022, but has now risen to 74p across major supermarkets. Although Assosia does not provide data for discount retailers such as Aldi and Lidl, these sugar prices are often subject to competitive matching by larger supermarkets.

The surge in wheat costs following Russia's invasion of Ukraine that initially drove up bread prices has since stabilized. However, ongoing conflicts in the Middle East have raised fears regarding global supply, as noted by The Andersons Centre.

Hewson mentions a "perfect storm" comprising increased expenses related to raw materials, energy, labor, and even new packaging regulations, which have collectively made these essential products more costly.

Are supermarkets profiting?

Amid rising checkout totals, the perception that supermarkets are profiting can be frustrating for consumers. Sales across the UK's leading supermarkets increased from approximately £130 billion to £160 billion between 2020 and 2024.

However, when accounting for sales alongside operating expenses, none of the primary retailers' profit margins have seen growth over the past two decades. Although this data does not break down specifics about the nature of food sales or profits generated from various categories, it reflects the intense competition present within the UK supermarket sector.

The Competition and Markets Authority's investigation into the grocery sector in July 2024 found no evidence indicating that supermarkets had artificially inflated prices during the period of food price surges attributed to the global energy crisis following Russia's invasion of Ukraine.

Hewson affirms that the UK supermarket landscape is "massively competitive," with many retailers willing to sell staple items at a loss in order to draw customers. "In such cases, supermarkets typically absorb those losses, which affects their overall profit margins," she explains.

"These businesses do not generate exceedingly high profits for every pound spent; they must exert considerable effort to maintain their profitability."

Andrew Opie, director of food and sustainability at the British Retail Consortium, representing supermarkets, stated that the UK is "one of the most affordable places in Western Europe for grocery shopping."

"As food inflation has increased in recent years, supermarkets have intensified their focus on providing value for essential products—occasionally selling items below cost and absorbing the impact on their margins to deliver savings for customers," he added.