UK retail trade heralds prospects for rising food prices
Food price update
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Experts warn that food prices will rise later this year due to a shortage of truck drivers and more regulatory inspections of imported food, coupled with rising fuel, freight and raw material prices.
Retail trade agencies say that the low food prices in the past few years may not last long. “Resellers face great resistance, even if [higher prices] It hasn’t materialized yet,” said Kyle Monk, Director of Analysis and Insights, British Retail Association.
Fraser McKevitt, head of retail and consumer insights at Kantar, a market research group, said cost increases, including recent wage increases and other incentives truck driver In order to alleviate the shortage, “it is so severe, I don’t know how they can avoid price increases.”
Kantar The latest four-week data, which tracks the prices of more than 75,000 foods and household goods, shows that food prices rose 0.4% year-on-year.
Inflation data from the National Bureau of Statistics shows Food prices are rising May and June helped push up the headline inflation rate, but they have dropped slightly recently.
The government believes that as the supply of low-cost labor in Eastern Europe declines after Brexit, higher wage costs — more and more obvious in food processing and transportation — will take a long time to be reflected in prices on shelves.
“[Government] Analysis shows that a 10% increase in labor costs within three years means a 2% increase in food prices,” Munch said. But he pointed out that in addition to rising oil prices, rising container freight rates and rising raw material costs, wage pressures are also increasing. .
The Food and Agriculture Organization’s food price index rose 31% year-on-year in July, especially driven by meat and grains.
In such a highly competitive industry, deciding which prices to increase, how much, and when to increase is crucial; McKevitt pointed out that for supermarkets, there is nothing directly related to price and market share.
According to Steve Dresser, founder of consulting firm Grocery Insight, the last thing supermarkets want consumers to see is “price increases at the edge of the shelf.”
In the past, it turns out that they are good at offsetting cost pressures by forcing suppliers to lower prices, lowering their own costs, or by persuading brands to pay for in-store promotions to generate revenue.
But because suppliers are now facing many of the same pressures, their ability to continue to do so is limited.
The first casualty is likely to be a promotional event. Supermarkets slashed promotional activities at the beginning of the pandemic because their operational complexity interfered with efforts to maintain adequate inventory in stores.
The proportion of sales of promotional items dropped from 36% to 21% Tesco The last fiscal year.
“In the summer [promotions] It has already begun to make a comeback, and before this month, this exacerbated deflation-because there were promotions this year, but not during the comparative period,” McKevitt said. “But this damping effect is starting to disappear.”
Dresser said the relaunched promotions are usually not as generous as the original version. “The transactions have started again, but they are weaker transactions-say 2 pounds, not 2 pounds, not 2 pounds,” he said.
Another strategy may be to reduce the packaging size, which is called “shrinkage and expansion” in the industry. These are often used in areas such as salads and soft fruits to smooth the seasonal transition from British products to more expensive imported goods.
But they are also spreading elsewhere. Dresser cited a reduction in the weight of frozen chicken parts and ready-to-eat products from 450 grams to 400 grams—if the price of the commodity remained the same, it would actually increase by 12%.
For most of the past five years, food costs have been stable or declining-partly because major supermarkets have cut prices in response to the increase in market share of discount stores Aldi and Liddell ——The proportion of food costs in British household expenditures has been declining for many years.