Institute of Grocery Distribution: Food Pound study

The Institute of Grocery Distribution (IGD) partnered with Oxford Economics to estimate the cost breakdown of your “food pound” and evaluate how food industry margins have evolved to help assess why food prices are rising.

To answer these questions, Oxford Economics modelled the UK grocery supply chain for a representative basket of food items, estimating cost shares across major supply-chain stages and inputs, and tracking changes in industry margins from 2020 to 2025. The analysis shows that food industry margins remain thin – typically 1-2% net – and have narrowed since 2020, despite rising retail prices. Consumer prices have generally lagged cost inflation, with labour and farm production costs identified as the main sources of cost pressure across the supply chain.

The report examines the cost breakdown for a £20.24 basket of nine everyday food products (apples, beef mince, bread, carrots, chicken breast, eggs, milk, pork sausages, and potatoes) and found that in 2025, the entire UK food industry – farmers, processors, and retailers – earned just 29p of profit.

A timely study, released just as energy disruption in the Middle East is raising concerns about the potential for higher transport, fertiliser and packaging costs to ripple across global food supply chains and as the UK government is evaluating policy responses to rising cost pressures.