On Monday, 3rd July, the Competition and Markets Authority (CMA) published its road fuel market study.
The report focused on the supply chain and found “problems in relation to three aspects of the retail market.”
Asda, which was historically the market leader in terms of low pricing, was found to have decided to achieve higher margins in 2022. This was brought about by reducing prices “more slowly than would previously have been the case.”
Morrisons is also named as historically having a more aggressive pricing approach.
Tesco and Sainsbury’s were found to have “largely passive pricing policies,” whereby they set prices based on local competitors rather than cost movements. This meant that Asda did not drop their prices, and neither did Tesco or Sainsbury’s.
This change resulted in the headline figure of motorists paying 6 pence per litre more for unleaded petrol, or a combined £900m. Diesel prices were hit even harder, with an average of more than 13ppl from January to May 2023.
According to the CMA report, supermarket margins increased from 4.6ppl in 2019 to 10.8ppl in 2022. At the same time, large non-supermarket margins rose from 6.8ppl to 10.3ppl during the same period.
Asda’s Pricing Strategy
We at PetrolPrices, wanted to look further into Asda’s pricing strategies and what has happened to the retail fuel market.
The CMA found that as prices fell, retailers did not pass the drop on to motorists and looked to increase their margins. However, this was at a national level. We looked at how Asda was pricing against other Asda sites. This comparison used Asda Bolton as a benchmark and compared all other Asda prices against it.
By comparing Asda sites against each other, you are removing global pricing factors, such as exchange rates, crude prices, wholesale diesel and unleaded prices. Local outages or transport issues may explain why a site in one area may become more expensive.
This chart shows that between August 2019 and May 2020, Asda priced relatively consistently across the UK, which means that no matter which Asda you visited, you would pay the same or comparable price. In April 2020, this was particularly true, where prices were nearly all identical.
From June 2020 to April 2022, prices spread more widely across the Asda sites. Note that this isn’t showing an increase in price but an increase in price against our benchmark, Asda Bolton, which became one of the cheaper Asda’s during this time.
April 2022 is again an interesting point on this timeline. Prices were nearly exclusively 158.7ppl and then 160.7ppl during this time.
From May 2022 onwards, there appears to be a shift in pricing strategy with a much wider spread of prices across the Asda sites. There is more than a 15ppl spread across Asda locations from May 2022. This isn’t because of global pricing factors or exchange rates.
Asda has changed its strategy; from a relatively consistent national pricing structure to significant variations across the country. And remember, the CMA found that Tesco and Sainsbury’s were passive during this period, meaning they used Asda as a guide to price their sites. Any change in pricing strategy or margin increase that was seen on Asda forecourts, was also seen across all the supermarkets, and in the other retailers.
The market has not performed as it should. Supermarkets have 44% of the road fuel market (2021). The CMA’s report notes that other retailers, including Tesco and Sainsbury’s, did not respond promptly to cost movements and/or try to win market share. The report suggested, “Asda and Morrisons have been able to keep their market share broadly stable across this period.” Asda increased prices due to a lack of price competition from others.
The proposed solution from the CMA is for more market transparency. We agree this is a good thing. But it is no silver bullet. And will it stop this type of thing from happening again? It is being branded as a new idea for the UK, but one that is available in Germany and Australia. Still, fuel comparison platforms such as PetrolPrices are already available in the UK.
To read more about fuel price data in the UK you can do so here, at our Latest Fuel Price Data analysis page.
Does this go far enough? Let us know your thoughts in the comments.
At PetrolPrices we are working and have been since 2005 on offering a more transparent fuel market. We continue to invest in the app and have recently added the Search Here button, making finding prices across the UK even easier. So, if you haven’t got the latest version, please check out the Play Store or App Store. Thank you to everyone that has added a price or written a review. We hope you continue to find value in the information provided within our app and website.