Tesco Strengthens Lead as UK Grocery Sector Maintains Stable Pricing

Disciplined pricing, loyalty schemes, and private labels drive competition in cost-conscious market

UK Supermarkets Avoid Price War Amid Inflation Concerns

The UK grocery market remains stable and competitive, showing no signs of a price war despite rising inflation and ongoing pressure on household budgets. According to a recent report by Bernstein, food retailers are maintaining rational pricing strategies, helping to keep the sector resilient during uncertain economic times.

Tesco Reinforces Market Dominance Through Competitive Pricing

Tesco (LON: TSCO) continues to lead the UK supermarket landscape, thanks to its disciplined pricing, strong private label range, and well-established loyalty programmes. Bernstein’s analysis shows that Tesco’s average basket price — including loyalty discounts — was 6% lower in 2025, boosting the retailer’s appeal among price-sensitive consumers.

The retailer is gaining market share steadily, although growth has slightly slowed. Tesco’s consistent pricing and clear value proposition ensure that no major rival is currently threatening its dominance.

Aldi and Lidl Remain Cheapest, But Tesco Narrowing the Gap

Bernstein’s grocery pricing tracker reveals the following supermarket price rankings:

• Aldi – most affordable
• Lidl – +1%
• Asda – +11%
• Tesco – +12%
• Sainsbury’s – +14%
• Morrisons – +16%
• Ocado – +24%
• Waitrose – +32%

While Aldi and Lidl continue to offer the lowest prices, Tesco is not far behind — particularly when Clubcard deals are factored in. This positions Tesco as a strong alternative to discounters, especially for customers who prioritise both price and convenience.

Sainsbury’s Gains Ground with Food-First Strategy

Sainsbury’s is also improving its competitive position. Its Food First strategy and Nectar Price campaign (launched in 2023) have helped to close the pricing gap with Tesco. In fact, in April 2025, Sainsbury’s was just one percentage point above Tesco in basket pricing.

Sainsbury’s saw the highest price increases over the past one and two years, largely due to promotional shifts into the Nectar loyalty scheme. Despite these increases, the brand is gaining traction among value-focused shoppers, with improving Kantar share data and favourable consumer sentiment.

Food Inflation Slowing, But Promotion-Seeking Persists

Although food inflation has eased, shoppers continue to seek out promotions and multi-buy deals. The cost-of-living crisis has made value-for-money a top priority, and Bernstein predicts that promotional activity will remain strong, especially as retailers begin to pass on increased supplier costs in the months ahead.

Tesco is well-positioned to gain volume thanks to its private label innovation, while Sainsbury’s is expected to benefit from a more competitive pricing structure and stronger loyalty engagement.

Non-Food Sales Still Under Pressure

Despite improvements in grocery pricing, non-food items remain a weak spot across the sector. Bernstein notes that around 60% of consumers are still cutting back on non-essential spending, a figure that has stabilised but remains high.

This ongoing caution is expected to impact retailers such as Sainsbury’s and Asda, which are more exposed to non-food categories. Cyclical challenges are likely to continue throughout 2025, limiting recovery in general merchandise and discretionary spending.

Outlook: Stability and Value to Define Grocery Market

The UK food retail sector continues to act as a safe haven in a volatile economy, with rational pricing and loyalty schemes keeping customers engaged. Tesco remains the clear market leader, while rivals like Sainsbury’s are strategically repositioning to stay competitive.

As food inflation ticks upward once again, retailers who offer clear value, effective promotions, and brand trust are likely to come out ahead in the months to come.

Sources: (Investing.com, Reuters)