14 Mar 2008


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What will be left on my shopping list?

Consultant editor Fiona Briggs on the implications of food price inflation

Another stormy week is drawing to a close and I am not just referring to the weather.

Once again, supermarkets have been grabbing the headlines and mainly because of rising prices and, boringly, carrier bags.

It began on Monday with the Office for National Statistics (ONS) revealing that food price inflation was up by 8.4% in the last 12 months – its highest level since 1986.

The ONS blamed rising meat costs in particular for the higher food prices.

Dairy producers and specifically cheese makers joined in the debate. They reported cheese prices have risen by almost a third in the past two years and warned of further price rises on the way as matured products come onto the market.

Wednesday was Budget day. Dull was the pejorative word used by political commentators to describe Alistair Darling's first bash at balancing the economy's finances.

I doubt that's how grocery retailers and consumers would sum it up. Unpopular would be far nearer the mark.

Tax rises on alcohol – 6% above the rate of inflation – will come into effect from midnight on Sunday.

That translates to a 4p rise in the price of a pint, 14p on bottle of wine and 18p on a 750ml bottle of sparkling wine.

Then there's extra duty on tobacco, already in play, with cigarettes up by 11p for a pack of 20.

And, of course, there was the warning shot to stores about single use carrier bags with the threat of legislation if retailers fail to reduce their usage.

On Thursday, when Morrisons released its preliminary results for the year to end 3 February 2008, outgoing chairman Sir Ken Morrison acknowledged: "The year under review saw the rise of inflationary cost pressures in a number of basic commodities such as dairy products and wheat.

"We fought hard to avoid passing these higher costs onto consumers, and we will continue to strive to operate at low cost in order to ensure maximum value for our customers."

According to a report on Bloomberg, Morrisons expects food price inflation to increase by between 2% and 2.5% this year.

And the same report reveals a leading investment bank has cut its recommendations on Tesco, Morrisons and Sainsbury's because of concern that higher food prices and a slow down in consumer spending will impact earnings.

More gloom then. And, it has all left me wondering what food stuffs and drinks will be left on my shopping list?

Meat, bread, milk, cheese, eggs, butter, alcohol…price rises are occurring on a growing basket of products. I'd turn vegan but I don't like nuts. Thank goodness I stopped smoking, otherwise, I'd be really out of pocket.

But supermarkets will at least be cheered by a new report released today by Verdict Research, which shows more people in the UK are shopping at their stores for non-food products.

In the last five years, the number of shoppers using supermarkets for their non-food needs has increased by 17% to over 62%.

Collectively, says Verdict, they are spending £19.7bn in supermarkets with shoppers attracted by both the convenience and competitive pricing.

As food prices rise, perhaps that non-food pricing strategy will prove to be a draw and help supermarkets maintain customer loyalty.

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