Tesco’s Meal Deal Price Hike: Greed or Just Business as Usual?

Ethan Shenker

If you’ve ever grabbed lunch in the UK, chances are you’ve relied on the famous Tesco Meal Deal. For a few pounds, you can get a sandwich, a snack, and a drink—quick, cheap, and reliable. But prices have been creeping up. What used to cost £3.60 now sets you back £3.85. That’s the third price rise in five years.

So what’s going on? Is Tesco squeezing customers for profit, or is it just trying to survive rising costs? Economics can give us a few ways to think about it.

Why Tesco Might Be Raising Prices: Profit Preservation

Tesco’s Meal Deal isn’t just about lunch…it’s a loss leader. That means Tesco probably doesn’t make much (if any) profit from it. Instead, it’s a lure: you come in for a Meal Deal, and while you’re there, you’re likely to buy other higher-margin items.

But running a business isn’t free. Over the past few years, costs have been going up:

●      Ingredients and packaging: Global supply-chain disruptions, shipping fee spikes, and poor harvests have raised the cost of supplying the shelves of grocery stores. Think wheat over the war in Ukraine.

●      Labour: Tesco recently agreed, as part of their agreement with the trade union USDAW, to pay workers the new London Living Wage, which rose from £13.15 to £13.85 an hour.

Economists call this cost-push inflation. When a company’s costs rise, it can either absorb the hit (which lowers profits) or pass some of those costs on to customers. Raising the Meal Deal price by 25p is Tesco’s way of protecting its already-thin margins without scaring customers off completely.

How This Affects Consumers: A Microeconomic Lens

From a microeconomics perspective, that 25p bump matters.

●      Consumer surplus falls. Consumer surplus is the difference between what you’d be willing to pay for something and what you actually pay. If you loved paying £3.60 for the deal, at £3.85 you’re getting 25p less “surplus satisfaction” each time.

●      Substitution effects kick in. If Tesco gets too expensive, customers might switch to competitors like Sainsbury’s, Morrisons, or Co-op, who price their deals between £3.50 and £3.80. The extent of this “switching” depends on cross-price elasticity of demand: if meal deals across stores are basically the same, people are more likely to jump ship.

But despite all this, market power matters. Tesco is so large and well-known that it can get away with a price increase without losing all its customers. Most shoppers still see £3.85 as a bargain compared to paying £7–£8 for the same items separately.

In other words: the price rise does hurt consumers a bit, but Tesco still offers enough value that most people won’t abandon the deal entirely.

Bigger Picture: What Lunch Teaches Us About Economics

The Tesco Meal Deal isn’t just about sandwiches—it’s a window into how firms navigate rising costs and how consumers react to price changes.

For students of economics, this everyday example ties together big ideas:

●      Cost-push inflation explains why prices rise even when demand hasn’t changed.

●      Consumer surplus shows how price changes affect welfare.

●      Elasticity highlights why some consumers will switch and others won’t.

And maybe the most important lesson? Economics isn’t just about abstract theories. It’s about the choices we make, and the trade-offs we face, even when we’re just grabbing lunch

Reference list

Jordan, D. (2025). UK inflation remains at 3.8% but food prices continue to surge. BBC. [online] 17 Sep. Available at: https://www.bbc.com/news/articles/cderznjj4r7o.

Meierhans, J. (2025). Tesco meal deal price rises to £3.85 for Clubcard holders. BBC. [online] 21 Aug. Available at: https://www.bbc.com/news/articles/clyr7renp51o.

Reserve Bank of Australia (2025). Causes of Inflation. [online] Reserve Bank of Australia. Available at: https://www.rba.gov.au/education/resources/explainers/causes-of-inflation.html.

Tescoplc.com. (2025). Tesco announces £180m investment in colleague pay. [online] Available at: https://www.tescoplc.com/tesco-announces-180m-investment-in-colleague-pay [Accessed 28 Sep. 2025].

About the Author

Ethan B. Shenker is an Economics student at Northeastern University London, pursuing a pathway in Law and a minor in Public Health. His academic and professional interests lie at the intersection of public policy, behavioural economics, and the law. Ethan has worked in New Jersey’s state government, where he analysed economic policy initiatives and their implications. He is passionate about applying economic thinking to real-world policy problems. At Northeastern, he is an active member of the Economics discipline, representing the university on the Fiscal Policy Challenge and serving as Student Coordinator of the Budding Economists Symposium. For inquiries or collaborations, Ethan can be reached at shenker.e@northeastern.edu.