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Food prices haved soared to their highest levels for 14 years as mounting pressures on the industry saw strong rises in both fresh and ambient products, according to the latest data.
Inflation in the sector accelerated to 9.3% in August, racing up from 7% in the prior month, the BRC and NielsenIQ reported this morning in the monthly shop price index. It is the highest level recorded since August 2008.
Fresh food inflation jumped to a rate of 10.5%, compared with 8% in July, while ambient food increased to 7.8% from 5.7%.
Fresh food prices were last higher in September 2008, while ambient hit levels not seen since March 2009.
BRC chief executive Helen Dickinson said the war in Ukraine and the consequent rise in the price of animal feed, fertiliser, wheat and vegetable oils continued to push up food prices, with milk, margarine and crisps seeing the biggest rises.
Non-food inflation slowed down in August to 2.9%, down from 3% in the month before, but still remained near to the highest level recorded by the index.
Overall, it meant shop price annual inflation rose to 5.1% this month, up from 4.4% in July - a new record for the index since it started in 2005.
Dickinson called for the government to intervene to help businesses on the brink.
“The situation is bleak for both consumers and retailers, but retail businesses will remain committed to supporting their customers through offering discounts to vulnerable groups, expanding value ranges, fixing prices of essentials, and raising staff pay,” she said.
“However, as retailers also grapple with growing cost pressures, there is only so much they can shoulder. The new Prime Minister will have an opportunity to relieve some of the cost burden bearing down on retailers, like the upcoming increase in business rates, in order to help retailers do more to help their customers.”
Mike Watkins, head of retailer and business insight at NielsenIQ, added: “Inflation continues to accelerate and shoppers are already cautious about how much they spend on groceries, with a fall in volume sales at supermarkets in recent months.
“We can expect this level of food inflation to be with us for at least another six months but hopefully some of the input cost pressures in the supply chain will eventually start to ease.
“However, with further falls in disposable incomes coming this autumn as energy costs rocket again, retail spend will come under pressure in the all-important final quarter of the year.”
Morning update
Asda has acquired the Co-op’s petrol forecourt business in a deal worth £600m, marking the supermarket chain’s entry into the convenience store market.
The deal price is made up of £438m in cash and a further £162m in lease liabilities.
It includes 129 grocery retail stores of between 1,500 and 3,000 sq ft with attached petrol filling stations, as well as three development sites.
The stores generated revenues of £863m in the year to June 2022.
About 2,300 staff will transfer from Co-op to Asda following completion of the deal.
Co-op said it would use the money from the deal to reinvest in its core convenience business, invest in pricing, store operations, technology, and logistics, and reduce its debt pile.
Asda co-owner Mohsin Issa said he saw convenience as “a significant growth opportunity” for the business. “This acquisition accelerates our strategy in this area and forms part of our long-term ambition to become the UK’s second largest supermarket,” he added.
For the full story on thegrocer.co.uk click here.
Desserts chain Cake Box has issued a surprise profits warning this morning as inflationary cost pressures and weaker-than-expected sales combined to squeeze margins.
The group said since it reported its full-year results in June that the trading environment had become “significantly more challenging”.
Inflationary cost pressures across the group increased above levels previously forecast and the board did not expect these to ease before the end of the financial year.
Cake Box passed some of the cost increases onto franchisees with a recent price hike but, despite the move, full-year gross margin will take a hit.
In addition, the group experienced weaker-than-anticipated sales at the franchise level during July and August, which resulted in franchisee like-for-like figures declining 2.8% in the first half to date. Cake Box blamed the recent heatwave for keeping customers away from its stores.
As a result of the the worsening outlook and increasing cost of living pressures on the consumer, the group now expected full-year profitability to be “significantly” below current market forecasts.
“The group is taking proactive action to mitigate the impact of increased input and administrative costs and to protect levels of profitability, including implementing supply price increases,” the unscheduled trading update said.
“Looking further ahead, the board remains confident in the Cake Box’s future growth prospects, underpinned by the increased investment in professionalising the group’s functions and the pipeline of new store openings across the country, with levels of franchisee deposits remaining at good levels.”
Shares in Cake Box have plunged 41% to 106p as markets opened on the back of the profits warning.
The FTSE 100 remains flat this morning at 7,359.08pts.
Early risers include Devro (+1.9%) and C&C Group (+1.8%), while Naked Wines (-2.7%) and SSP Group (-1.7%) are among the fallers.
Yesterday in the City
The FTSE 100 lost early momentum to end the day 0.9% down at 7,360.95pts.
Embattled THG led the fallers, tumbling 6.3% to 56.3p, while Vimto owner Nichols fell 4.2% to 1,106.3p, Parsley Box was down 3.9% to 10p and Wynnstay Group dropped 3% to 572.3p.
Kerry Group also dipped 2% to €102.75 after the Irish group announced it had paid $107.5m for Kraft Heinz’s B2B powdered cheese business.
Naked Wine surged back 12.2% to 141.1p but it still remains 77% lower this year on the back of a bleak outlook for the company.
Glanbia was also among the risers, up 7% to €12.73, as was Deliveroo, up 5.3% to 82.1p.
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