Foodstuffs stores hold grocery price increases below FPI for fourth month in a row
Tuesday, 13 September 2022
- Stats NZ Food Price Index (FPI) found food prices increased 8.3% for August 2022 compared to a year ago, the largest increase in 13 years.
- In August 2022, the average supplier cost price increase to the Foodstuffs co-operatives on the same products measured in the FPI basket was 8.2%.
- On the same products, the retail price increase to Foodstuffs customers was 6.1% - meaning the co-operatives’ members held prices in their stores at 2.2% less than inflation in August, and 2.1% below cost increases from suppliers.
- The largest component of shelf prices is the cost of goods from our suppliers – 68c in every dollar. This month’s Grocery Supplier Cost Index shows the pressure on supermarkets’ costs from record supplier increases.
- The Foodstuffs co-operatives are directly responsible for 19c of every retail dollar on the shelf at PAK’nSAVE, New World and Four Square stores, which covers wages, costs, and provides post-tax profit of 4c.
Food prices were 8.3.% higher in August 2022 compared with August 2021, Stats NZ has announced today, the largest increase in 13 years.
As part of Foodstuffs’ commitment to New Zealanders to help fight inflation, stores in the Foodstuffs co-operatives have held food price increases below food price inflation and below supplier increases for the fourth month in a row. On the same products measured by FPI, the increase to Foodstuffs customers was 6.1% - meaning the co-operatives’ members held prices in their stores at 2.2% less than inflation in August.
The average supplier cost price increase to the Foodstuffs co-operatives on the same products measured in the FPI basket was 8.2% in August.
The Foodstuffs North Island and South Island co-operatives are owned by their 460 members – family grocers who operate their own local New World, PAK’nSAVE, and Four Square stores around New Zealand.
Foodstuffs NZ Managing Director Chris Quin says record inflation is hitting New Zealanders hard, so every dollar saved at the checkout counts.
“Our customers are paying attention to what they’re spending and are looking to find value when shopping for their groceries. "
“We’ve been measuring how we compare against FPI for four months now, so that customers have a full and transparent picture of food cost changes and what’s driving them. "
“This analysis shows the heavy lifting we are doing for customers to absorb record cost increases so we're not passing them straight on to customers in the retail price on shelf. "
“We’ve done this by staying laser focused on delivering value within the 19 cents of every dollar on shelf we’re responsible for. "
“That means buying well to get products at a fair price for customers and running our stores and supply chain as efficiently as we can to keep costs down in the business. "
“Other meaningful action we've taken to keep prices down includes our continued Price Rollback initiative. We’ve rolled back pricing on key products across PAK’nSAVE, New World and Four Square stores, with new initiatives also being introduced to help customers find value in-store and online - including the introduction of Every Day Low Pricing at New World. "
“We’ll continue to work hard to keep prices down for our customers, but we’re also realistic about the fact that inflation isn’t going away. We’re facing a perfect storm of higher input costs and global supply chain challenges. "
“Acute labour market shortages and their impact on operations right across the supply chain are adding fuel to the domestic food price inflation fire. We’re one of the largest workforces in New Zealand, with our two co-operatives employing almost 40,000 people, so we are dealing with these pressures and their impact on a major scale. "
“Our domestic transport costs are continuing to be affected by persistently high fuel prices at the pump. We’ve seen fuel related price increases for freight adjusted again in August to now sit at over 20% this year. International freight costs have also risen significantly, with the standard cost to Foodstuffs in this area rising from between $500k-$1m to $2-$3m per month. Per container costs have more than doubled since the pandemic began, up from $2,500 per 20-foot container in April 2020 to $6,500 in July this year. "
“The biggest cost of putting groceries on the shelf is what our suppliers charge us. This year, we’ve seen record increases from suppliers across all goods. Supplier costs make up 68 cents of every retail dollar on shelf in the supermarket, putting significant pressure on the price of everyday items New Zealanders rely on in their weekly shop.”
In addition to measuring supplier cost increases against the Stats NZ FPI basket of goods, Foodstuffs has commissioned economic consultancy Infometrics to track the changes in the cost of all grocery goods from suppliers to the co-operatives on a monthly basis.
Earlier this week Infometrics released the second monthly Grocery Supply Cost Index (GSCI), which shows that cost increases from grocery suppliers are continuing to accelerate - with an 8.7%pa rise in August 2022.
The August Index showed cost increases from suppliers remain broad-based across product categories. Almost three times the number of products increased in cost than for the same month in 2019, with larger increases being seen across a wider group of these products. In August 2022, 9.4% of products rose in cost by more than 20%, compared to 6.0% of products in 2019.
“Sustained higher input costs are driving suppliers to pass on these higher costs, and these record cost increases are keeping pressure on food prices,” says Quin.
Quin says the outlook for global and domestic food prices remains uncertain.
“Economists in New Zealand are saying that weather risks will remain a key driver of food price inflation in the coming months. Internationally, we’re hearing a similar warning – while some of the pressures from the war in Ukraine appear to be easing, the longer-term consequences could be here to stay and Europe’s historic summer drought is also likely to impact key crops and prices. "
“We know from our customers that the rising cost of living and being able to afford their weekly shop is still their number one concern."
“There’s not going to be a quick solve and we know that the rest of 2022 will remain challenging for New Zealanders. While it’s unrealistic to expect that grocery prices are suddenly going to fall, we’ll continue fighting inflation and looking for ways to support our customers to find value every day.”