More food deflation to come says Tesco chief

A typical basket of food from Tesco is now 3% cheaper than it was a year ago according to the supermarket’s chief executive, Dave Lewis, who also said he believed there is “more deflation to come”.

The comment was contained in a mass of material released by Tesco today as the supermarket giant unveiled underlying profits for the first half of its financial year of £354m, 55% down on the same period last year, when it made £779m.

While the headline figures continue to make bleak reading, the group reported an easing in its decline in like-for-like sales in the UK, which fell 1.1% in the second quarter, better than the first quarter fall of 1.5%. Transactions rose 1.5%, however, and sales volumes rose 1.4%.

“We have delivered an unprecedented level of change in our business over the last 12 months and it is working,” said Mr Lewis (pictured above), claiming that the latest results show “sustained improvement” across a broad range of key indicators.

“In the UK, we continue to improve all aspects of our offer for customers, resulting in volume growth which is allowing us to create a virtuous circle of investment.”

From a farm and food perspective, the results presentation included a “rebuilding trust and transparency” section in which attention was drawn to the group’s “further increased emphasis on lower, more stable prices”.

It was also started in this section that, under the extended Tesco Sustainable Dairy Group milk pricing model to British cheese suppliers, it was guaranteeing dairy farmers would continue to be paid at a level above the cost of production. It was also claimed there had been a “strong improvement” in the group’s “supplier viewpoint measure of overall supplier satisfaction”.

For pigmeat, of course, Tesco continues to a mid-range supporter of British pork, based on the latest porkwatch figures. These show the supermarket sourcing 63% of its pork from British producers in July, slipping from 65% in May, 2015.

Tesco’s best pigmeat performance relates to sausages (83% British), followed by ham (59%) and bacon (42%).

See Tesco’s half year results

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