Foodstuffs’ inflation fight for customers - stores keep grocery price increases below FPI for fifth consecutive month
“Global food growers, makers and retailers are facing the most complex set of headwinds in decades, which is continuing to impact supply and push up prices,” says Foodstuffs NZ Managing Director Chris Quin.
Commenting on the latest food price inflation figures released by Stats NZ today, Quin says right now with food price inflation holding at a 13-year record high (8.3% in September), for Foodstuffs keeping it simple is key to delivering value for customers at the checkout.
Quin has just returned from the US and Canada, meeting with other major grocery retailers and having discussions on approaches to this challenge globally.
“We’re all facing the same set of challenges driven by the three W’s - war, wages and weather. We’re also seeing the same changes in consumer behaviour, where value is now king.
“What those international retailers wanted to hear from us is how we are carefully managing our input costs so that we can hold our ground in the fight against inflation for our customers.
“Our message to them was by focusing on the things that we can control and that we know will deliver value for customers at the checkout. That includes buying well, running our stores and supply chain as efficiently as possible, and keeping costs down.
“Other meaningful action we've taken to keep prices down includes our Price Rollback initiative, with rolled back pricing on key products across PAK’nSAVE, New World and Four Square stores to 2021 levels. The introduction of Every Day Low Pricing at New World is one way we’ve been able to provide more certainty for customers at the checkout, by ensuring low stable pricing for 100s of everyday items.
“The latest analysis shows that our work to fight inflation for our customers is paying off. It also shows the extent to which we’re absorbing record cost increases, so that we’re not passing them all directly onto customers in the retail price on shelf.”
Supplier cost increases to Foodstuffs on the FPI basket of goods outstripped inflation this month. The biggest increases were in grocery, followed by fruit and vegetables.
September Key Numbers
- Stats NZ Food Price Index (FPI) shows food prices increased 8.3% for September 2022 compared to a year ago.
- In September 2022, the average cost increase from suppliers to the Foodstuffs co-operatives on the same products measured in the FPI basket was 10.3%.
- On the same products, the retail price increase to Foodstuffs customers was 6.8% - meaning the co-operatives’ members held prices in their stores at 1.5% less than inflation in September, and 3.5% below cost increases from suppliers on the FPI basket.
- This month’s Infometrics - Foodstuffs New Zealand Grocery Supplier Cost Index shows the continuing pressure on supermarkets’ costs from record supplier increases, up 9.2%pa in September.
The Grocery Supplier Cost Index released this week shows that cost increases from grocery suppliers to supermarkets were up 9.2%pa in September 2022, with sustained larger cost increases from suppliers and more costs going up to a greater degree. The Index measures the change in the cost of all grocery goods charged by suppliers to the Foodstuffs North and South Island cooperatives. In September 2022, the cost of over 5,400 products went up - almost double the number of products which had a cost increase in September 2019, at 2,768.
“Globally, producers are saying that they aren’t seeing an end to inflation and that they’re paying higher prices for labour, commodities and packaging. It’s the same story here in New Zealand,” says Quin.
“Acute labour shortages continue to be one of the biggest problems facing businesses. The labour squeeze is not only hurting our industry, but also our producers. Fruit and veges are going to cost more if we don’t have enough people to pick, pack or stack them on shelf.
“Now we’ve also got the added challenge of a weaker New Zealand dollar, which will push up the cost of importing groceries further.”
Quin says the consumer price inflation data set to be released in New Zealand next week will show us if headline inflation is peaked, but there’s still no sign of this happening with food prices because of the complex set of headwinds facing the global industry.
“In our last quarterly customer insights survey, around a third of our customers said they are planning to budget more carefully and shop around more to find the best deals this Christmas. Our number one priority is helping customers find value for their budget in every supermarket aisle.”
The Foodstuffs North Island and South Island co-operatives are owned by their 460 members – family grocers who own and operate their own local New World, PAK’nSAVE, and Four Square stores around New Zealand.