Customers change shopping habits as record inflation bites harder

Food Price Index Nov 11

Caption: Stores in the Foodstuffs co-operatives hold price increases to customers below inflation and below supplier cost increases for six months in a row.

“Broad-based cost pressures are still building for everyone growing, manufacturing and retailing food, baking in the conditions for inflation to continue well into 2023,” says Foodstuffs NZ Managing Director Chris Quin.

Commenting on the latest food price inflation figures released by Stats NZ today (reaching 14-year highs), Quin says customers are changing the way they shop as prolonged record inflation bites harder.

“Half of our customers describe their financial situation as “precarious”. Overall, we’re seeing customers buying less, cutting out non-essential items, buying cheaper brands and shopping around to get the best deals.

“Customers are hearing the message that 2023 may not provide relief for households as stubborn inflation continues to eat away at their weekly budget for everything, from paying the mortgage to keeping the lights on, to filling the car up and paying for groceries.

“Our latest Customer Insights Survey shows an increase in the numbers of customers changing how they shop to stretch their food budget further.”

The quarterly survey of over 1,000 customers across the Foodstuffs co-operatives provides a snapshot of what’s on shoppers’ minds.

October findings

  • Food price increases have resulted in customers buying less across all categories than they did 12 months ago, with the exception of Frozen which has seen a net increase.
  • Half of customers claim they are cutting back on non-essential items - increased from 49% in June to 51% in October.
  • 2 out of 5 customers are switching to cheaper brands – increased from 36% in June to 40% in October.
  • Around 1 out of 3 customers are shopping around to get the best deals, eating out less frequently and buying fewer items - decreased from 38% in June to 37% in October.
  • 1 in 4 customers are buying more from a lower cost supermarket (of which PAK’nSAVE received the most mentions).

Inflation fight set to continue

Stats NZ Food Price Index (FPI) shows food prices increased 10.1% for October 2022 compared to a year ago.

In October, the average cost increase from suppliers to the Foodstuffs co-operatives on the same products measured in the FPI basket was 10.4%. On the same products, the retail price increase to Foodstuffs customers was 7.4% - meaning the co-operatives’ members held prices in their stores at 2.7% less than inflation in October, and 3% below cost increases from suppliers on the FPI basket. This is the most significant result since the co-operatives began tracking and comparing price increases to customers against food price inflation.

“We’re heading into the busiest trading period and the big challenges facing our co-operatives in fighting inflation for our customers are still acute labour shortages and record increases in the cost of goods we buy to put on shelf,” says Quin.

“As well as the international events still keeping food prices at record highs, our sector from paddock to plate is at the front line of impacts resulting from the extreme shortage of labour in New Zealand, including rising costs, constrained production and our ability to get food on shelves.

“Labour shortages are one of the key drivers of domestic cost pressures for retail groceries as there are not enough people to pick, pack and stack food for market. Getting enough staff remains tough and will put pressure on the supply chain, distribution networks and stores over the Christmas period.”

This month’s Infometrics - Foodstuffs New Zealand Grocery Supplier Cost Index shows the intensifying pressure on supermarkets’ costs from record supplier increases, up 10%pa in October.

“We’re also working hard with our international suppliers to make sure that New Zealand gets the product it needs to get through the busy summer season,” says Quin.

Summer brings relief for fruit and veges

“One of the shopping changes we saw through winter and spring was customers buying more frozen fruit and veges to save money, with the cost of produce being one of the key drivers of food price inflation,” says Quin.

“We’re now heading into summer, so it’s a great time to be thinking about shopping seasonally for fresh fruit and veges.

“In particular, the prices of summer salad crops are starting to come down after a challenging winter. Things like salad bags and lettuces, tomatoes, capsicums, avocados and telegraph cucumbers are now in season and better value for customers.

“Growers and retailers will be hoping for good weather this growing season to ensure strong seasonal supply. 

“With around a third of customers now actively shopping around to get the best deals, all of our banners and individual stores will have to compete hard to offer New Zealanders the best value over summer.

“We’re also continuing our broader initiatives to fight inflation for our customers, including Rollback in PAK’nSAVE and EDLP in New World.”