Overall record for grocery inflation to be surpassed 'come August', predicts retail expert

Supply chain issues and labour pressures have added to costs in food production, which are now being fed back to shoppers.

Fraser McKevitt, head of retail and consumer insight at Kantar, said he expects the overall record for grocery inflation to be surpassed 'come August'.

He added: 'Grocery prices continue to soar to near record-breaking heights and have jumped by another 1.6 percentage points since last month.

"With many of those families unable to save during lockdowns, they are now approaching the biggest cost-of-living crisis in a generation with no financial buffer.

"Families with no savings are hugely reliant on friends and family to cope with unexpected expenses.

"However, there's no guarantee that they'll be in a position to provide support – because surging energy bills will affect almost all households during the difficult winter to come.

"As a result, anxiety levels among families with no savings safety net are far higher than those with savings to fall back on.

"This is the second highest level of grocery inflation that we've seen since we started tracking prices in this way in 2008 and we're likely to surpass the previous high come August.

Micro supply and demand issues continue to affect prices in many areas

"With grocery price inflation at almost 10%, people are now facing a £454 increase to their annual grocery bills."

Supermarkets have also seen a 14% jump in ice cream sales and a 66% rise for sun care products over the month as Britons experienced soaring temperatures.

Mr McKevitt added: "People are increasingly turning to own-label products to drive down the cost of their weekly shop.

"Supermarkets' own lines are growing by 4.1% this period, while sales of branded items have fallen by 2.4%.

"It's a complex picture and the grocers are busy negotiating with their suppliers to mitigate impact at the tills as far as possible.

"We've seen this play out in the headlines in recent weeks, with some well-known brands temporarily disappearing from supermarket shelves over pricing disputes."

A recent report from CGA and Prestige echoed McKevitt's predictions, showing the key factors driving inflation to include Russia’s invasion of Ukraine and the mounting costs of energy and supply.

Foodservice is also facing increased wage bills, with UK job vacancies reaching 1.3 million in May, while various micro supply and demand issues continue to affect prices in many areas.

With most observers now expecting a long war in Ukraine, the report predicts there is little chance that inflation will fall below 7% until at least the second quarter of 2023—and may yet rise further over the remaining months of 2022.

Prestige Purchasing CEO Shaun Allen said: “High levels of inflation are clearly around for the long haul. Our analysis shows that the delta between operators with average versus good market pricing is now over 9%, which is about 3 percentage points of gross margin. Operators would be well advised to invest in skills and resource to manage this volatile environment.”

James Ashurst, client director at CGA by NielsenIQ, added: “Inflation now hasn’t been below double digits since January, and the relentless pressure on prices is squeezing businesses across the food and drink sector. With the war in Ukraine and consumers’ cost-of-living crisis mounting, we must expect challenges to get worse before they get better.”

Sources: Daily Mail

Grocery Insight