As £12.8 billion is spent on food, the cost of food continues to rise. However, a retail association reports that inflation in the sector as a whole is being held down by discounting to move stock.
According to a report from the retail industry, food inflation reached a record annual rate in December as cash-strapped people prepared for Christmas.
The latest British Retail Consortium-NielsenIQ shop price index revealed a 13.3% increase in typical food supermarket prices between December 2021 and last month.
In November, the rate had stood at 12.4%.
The research revealed that fresh food prices contributed the most to the increase, with an annual increase of 15%.
Even so-called ambient foods, such as pasta and canned items, had an 11% increase.
Aside from food, the BRC study observed that there were some opportunities for shoppers to save. As the total inflation rate in shops slowed to 7.3% for the month.
According to the BRC, this was primarily due to discounting by non-food merchants in the run-up to Christmas.
A separate survey illustrated the severity of inflation’s impact on grocery buyers throughout the holiday season.
Despite a push towards value categories, Kantar Worldpanel statistics revealed record spending in the four weeks preceding December 25.
The total expenditure of £12.8bn was £1.1bn more than in December of last year.
In actuality, sales volumes – the number of items purchased – decreased by 1%.
Non-food price increases moderated
Given the magnitude of the cost of living crisis, BRC chief executive Helen Dickinson stated that the holiday season had been “difficult” for families.
“Not only did the cold snap compel individuals to spend more on their energy bills. But the war in Ukraine continued to drive up the price of animal feed, fertilizer, and electricity,” she explained.
“Non-food price increases moderated as several businesses resorted to discounting to get rid of extra stock amassed. As a result of supply chain delays, allowing some customers to purchase inexpensive gifts.
Fresh produce inflation
The fall in non-food inflation counterbalanced the increase in food costs, resulting in a leveling off of price increases overall.
The New Year is not expected to bring about a significant improvement in the economy. Since high inflation and rising interest rates will restrain demand and slow the rate of price increases.
It is hoped that the pace of inflation in consumer prices has peaked – at least for the foreseeable future. But it is anticipated to remain persistently high throughout the winter.
While more individuals eating at home is believed to have benefited grocers and hospitality. Retail store jobs are expected to be at risk in the coming months as consumers tighten their belts.
On Thursday, a series of well-known companies, including Greggs, B&M, and Next, release financial updates. Each is likely to have a cautious outlook for future sales.
Mike Watkins, head of retailer and business insight at NielsenIQ, stated, “Consumer demand is likely to be poor in the first quarter due to the impact of energy price hikes. And the arrival of many consumers’ Christmas spending bills.
Therefore, the rise in food inflation will place more strain on household budgets. And it is unlikely that consumer attitudes toward personal finances will improve shortly.
Having paid for their basic supplies, consumers will have less money to spend on discretionary retail. Which will do little to drive demand in non-food channels.
