The clamour to denounce supermarkets and suppliers for their “rampant profiteering” and “global greedflation” keeps growing louder. Boycott the brands! Switch your supermarket! Even Goldman Sachs fears “the end of capitalism”.
What doesn’t help is that while food inflation keeps going up – reaching a new 45-year high of 19.1% in the latest ONS numbers – overall inflation keeps falling, and shoppers can see costs coming down, especially fuel, but also many commodity costs. So there’s understandable scepticism and anger that food remains an outlier.
This all ignores the considerable lag in food and drink supply chains, due to hedging, forward buying, and of course the relative negotiating positions of suppliers.
If your bargaining power is strong – a Heinz, Unilever, Colgate, P&G or Mars – you can push up prices close to, as much as, or more than your costs. The negotiation will not be without pushback from retailers, but there are other options out there in a competitive, fast-moving international market. It’s not without risk, however. As we report this week, branded canned goods manufacturers have hiked prices by over 20%, but in doing so, shoppers have voted with their feet (and hands), picking own-label alternatives, and/or walking across the road to cheaper rivals, and volume sales are down almost as much.
If your bargaining power is weak, on the other hand, the chances are you won’t get much support from supermarkets. In fact, they might even use the cover of inflation to hike prices – without giving you a cut.
That’s what we saw with eggs last year – until shortages hit in the autumn. And that’s what we’re seeing with apples. While shelf-edge prices on the cheapest apples rose 17% last year, according to ONS data (and some British apple SKUs still more), growers reported an average increase of just 0.8%. At the same time, supermarkets have allowed Aldi to become the biggest seller of UK-grown apples. That’s not a good look on any level: for UK jobs, or shoppers or food security. It’s not much cop for Scope 3 net zero carbon commitments, either.
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