Morrisons boss warns meals costs will proceed to rise as basket sizes shrink

The boss of Morrisons has warned food inflation is set to rise ‘over the coming months’ as shoppers add less to their baskets.

Rami Baitieh said ‘challenging inflation, lower consumer confidence and Budget uncertainty’ had all weighed on consumer sentiment at the end of last year.

He said consumers were especially feeling a squeeze last autumn when concerns over the Budget loomed heavy.

And speaking about cost of living concerns moving forward, he said: ‘To be honest with you, we believe that [food] inflation is going up and will go up over the coming months.’

His remarks came as official figures revealed that the price of food and soft drinks rose 4.5pc in the year to December – up from 4.2pc in November – driven by higher vegetable and cereals prices. 

The boss of Morrisons has said he expects food inflation to rise in the coming months

Baitieh said basket sizes had shrunk over the past year, but consumers had been making more frequent trips to seek out the best deals.

As the grocery market ‘remains competitive’, Morrisons has slashed prices, including 2,500 price cuts at the start of January.

The chief executive has been attempting to turn around the beleaguered supermarket’s fortunes in the face of higher costs and increased competition from discounters.

The supermarket reported a 3.4 per cent growth in sales in the six weeks to 4 January, with a boom in the sales of its premium ready meal range The Best, which rose 17.6 per cent.

Baitieh said: ‘We had a good Christmas in 2025, providing a solid foundation for the first quarter.’

Trading picked up over Christmas after sales growth slowed ahead of the Autumn Budget, when consumer confidence was dented by speculation over tax increases.

He said the group had been forced to grapple with ‘more challenging conditions’ over the past year, including a £200m hit from higher wages, National Insurance payments and packaging levies.

These higher costs from the Government were partly to blame for it posting flat earnings of £835million for the year to October 26. It also bemoaned the impact of a cyber attack in the first quarter and higher-than-expected inflation. 

Annual sales rose 3.2 per cent to £15.8billion.

There are fears Morrisons could soon lose its place as the UK’s fifth biggest supermarket to cut-price Lidl. The retailer has already been elbowed out of the top four by discounter Aldi.

It has struggled since it was taken over by private equity a few years ago. The retailer’s stock system was also thrown into chaos in November 2024 when its supply chain software provider Blue Yonder was hacked. 

Shore Capital analyst Clive Black said Morrisons had benefited this Christmas as the Blue Yonder fiasco had ‘messed up Christmas 2024, so [there was] a favourable comparative base.’

But he also pointed to ‘a good trading plan that was pretty well executed, and no doubt benefiting from the ongoing issues that have held back the trading performance of quite close rival, Asda too.’

‘So, whilst not quite trading with the positive momentum of M&S, Sainsbury, Tesco or Waitrose, the gap was lesser than compared to recent Christmas’, whilst Morrison outperformed Aldi, Asda, the Coop and Iceland. So, nicely in the middle of the pack rather than being a laggard.’