Greedflation – why falling food prices may take months to feed through to shoppers | Personal Finance | Finance

Food and non-alcoholic drinks rocketed by 15.7 percent in the year to April, the sharpest increase in 45 years, with fresh food up 17.9 percent.

British Retail Consortium chief executive Helen Dickinson said increased production and packaging costs are driving up the cost of everything from coffee beans to ready meals.

She assured us that grocery prices set to fall as “the cut to wholesale prices and other cost pressures filter through”, with the price of butter and vegetables already coming down.

Yet many suspect foul play. Liberal Democrat leader Ed Davey is now calling on the Competition and Markets Authority to investigate whether supermarkets and food multinationals have been profiteering.

So are shoppers being ripped off and when will the pressure on household budgets ease?

Supermarket price inflation has added £837 to annual household bills, according to market analysts Kantar.

Unite general secretary Sharon Graham blames profiteering right along the food supply chain leaving the British public “hostage to greedflation”.

Profiteering accusations are hard to prove, said Myron Jobson, senior personal finance analyst at Interactive Investor. “Many retailers are struggling to absorb higher global food, energy and labour costs.”

Sainsbury’s recently announced a £690million profit but this was actually down five percent as margins slipped from 3.4 percent to just 2.99 percent.

Chief executive Simon Roberts insisted it was “absolutely determined to battle inflation for our customers”.

Tesco’s £753million full-year profits were actually half last year’s, and chief executive Ken Murphy insisted it had not passed on all its additional costs to shoppers. Its margins are wafer thin at 2.3 percent.

Yet supermarkets could do a lot more to help consumers, Jobson said, while urging customers to shop around. “We’ve already seen a large number of shoppers jumping ship to German discount retailers like Aldi and Lidl.”

Aldi was the UK’s cheapest supermarket in April, according to consumer champion Which?. It charged £69.99 for a basket of 39 items while pricey Waitrose charged £87.33 for the same goods, a hefty £17.34 more. 

Lidl was next cheapest at £70.64. 

Among the big four, Sainsbury’s was cheapest charging £76.85 for the same items, followed by Asda at £77.92. Tesco charged £78.09 and Morrisons £81.46.

Which? has launched an Affordable Food For All campaign and retail editor Ele Clark said: “Supermarkets must do more to help struggling customers.”

She called on them to make sure budget ranges are available in all branches, including convenience stores, and improve unit pricing so that customers can easily work out what’s best value

Laura Rettie, editor-in-chief of Finance.co.uk, said cash-strapped shoppers should set a food budget and stick to it. “Plan meals and only buy the items you actually need. Impulse purchases soon add up.” 

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Try to eat before you doing a big shop. “Shopping when you’re hungry will typically make you buy larger quantities and more processed junk.”

Swap branded items for cheaper alternatives and look for those yellow stickers showing marked down goods, which typically appear between 6pm and 8pm.

Use all the loyalty cards you can, Rettie added. “If you use different supermarkets, sign up for all their cards, schemes and promotions.”

Your local market may offer better value fruit and veg. “Stock up on long-life products when they’re on offer. Take advantage of multi-buy or discounted offers but only if they’re something you would buy anyway.”

The supermarket shop is an increasingly painful experience for all of us, said Sarah Coles, head of personal finance at Hargreaves Lansdown.

“With hard cheese up 44 percent and eggs up 32 percent, even a simple omelette is pricey. A litre of olive oil is up almost 50 percent to £5.78.”

We’re not safe in the local takeaway or the pub either as prices are rising there, too.

Coles is optimistic that prices will slow, but we’ll have to be patient. “When wholesale commodity prices fall, it doesn’t feed into prices on the shelves overnight.

“Your supermarket trolley is at the end of a very long supply chain that might start months earlier. It means there’s going to be a lag before cheaper costs filter through.”

Until they do, shoppers will continue to take claims that food inflation is set to ease with a pinch of salt.