Food inflation: The only way is up?

While supermarkets have been protecting shoppers from commodity cost increases through “unprecedented levels of discounting”​ (39% of fast moving consumer goods were on offer during December), this was not sustainable longer-term, said the BRC.

Director general Stephen Robertson said: “There are considerable inflationary pressures that have built up in the supply chain over the second half of 2010. Retailers are already holding back a large proportion of these pressures as the sector is extremely competitive. However, it would not be surprising to see inflation creep higher over the coming months as there is no sign of commodity prices easing in the near term. “​

Oilseeds, sugar, cereals at 30-year high​

The price of oilseeds, cereals and sugar was at a 30-year high, while the Food and Agricultural Organisation’s' food price index has just risen for a sixth consecutive month to the highest level since its inception in 1990, noted Robertson. Meanwhile, flooding in Australia was expected further to disrupt sugar production, potentially shrinking overall output by up to 20%.
​

“Extreme weather and poor harvests have driven coffee up 52%, wheat 45% and soya beans 38%. Yet the shop price of food is up only 4% and that figure is no higher than the previous month.”​

In fact, retail food inflation has remained relatively stable for the last five months, ranging between 3.8% and 4.4%, he added. “There has been considerable pressure on grocery supply chains from events in the global economy, but shop price food inflation in December​ [4%] is still relatively low.”​

Sainsbury’s and Waitrose shine over festive season​

Meanwhile, the latest grocery share figures from Kantar Worldpanel covering the 12 weeks to December 26 reveal that premium own-label ranges across the top four supermarkets grew by 11% year-on-year.

As for the festive sales rankings, Waitrose led the pack, notching up 9.4% growth over the period, followed by Lidl at 8.9%, Sainsbury’s at 7%, Aldi at 6.6%, Tesco at 5% and Asda at 4.6%.

Marks & Spencer clocked up a 3.5% rise in UK food sales in the 13 weeks to January 1 (1.8% up on a like-for-like basis), while Morrisons reported a 3.1% rise in sales (4.7% including fuel) and 1% rise in like-for-like sales (4% including fuel) in the six weeks to January 2.