Fighting Food Price Inflation

Food inflation

Latest Stats NZ figures show retail prices for foods included in its Food Price Index basket of goods rose 6.3 percent year-on-year in October 2023, compared to 8.0 percent pa in September 2023.

Foodstuffs' data on the same categories shows retail prices at the two co-operatives' 500+ stores were up 6.3 percent pa in October (vs. 7.5 percent pa in September), while suppliers charged them 7.3 percent pa more, on average, across the same basket of goods categories (vs. 7.3 percent pa in September).

Foodstuffs' data shows many vegetable essentials well down in October year-on-year: cauliflower (down 33.6 percent), broccoli (down 30.7 percent), lettuce (down 27.5 percent) and avocados (down 21.3 percent).

Earlier, the latest Infometrics-Foodstuffs NZ Grocery Supplier Cost Index (GSCI) showed the average cost that suppliers charged the two co-ops across a much broader set of 60,000 goods rose by an average of 5.4 percent in the year to October (vs. 6.1 percent pa in September).

"After almost two years of battling runaway inflation, there are now positive signs that the war is slowly being won at the checkout with supplier cost rises and retail price increases both continuing to fall in October," said Foodstuffs New Zealand managing director Chris Quin.

"We remain mindful that many of our customers are doing it tough. We're still in a local and global inflationary environment but back around the rate we saw in mid-2022. So, it feels like we might be over the hump and trending downwards, but still not where we'd like to be."

Quin continued that a key strength of the co-operative model was its local grocers' ability and desire to respond to economic challenges in the interests of their customers and communities.

"We saw it during Covid, and we've seen it again in the fight against inflation, with our stores doing their best to keep the price increases below the official food inflation rate."

Quin's insights follow the release of Stats NZ's latest monthly figure for food price inflation, tracking the price of a representative basket of goods within the agency's Food Price Index.

While the price of foods included in the FPI basket grew 6.3 percent pa in October 2023, prices for the same product categories were also up by 6.3 percent pa, on average, at the Foodstuffs co-operatives' 532 owner-operated stores.

The outlook for summer is brighter, with warmer weather and better light levels providing good growing conditions for a range of products. We now see lower costs and prices, especially for covered crops and greens.

Foodstuffs' data shows many vegetable essentials were well down this October compared to last year: cauliflower (down 33.6 percent), broccoli (down 30.7 percent), lettuce (down 27.5 percent), avocados (down 21.3 percent) and capsicums (down 10.2 percent).

At the same time, produce experts said pumpkin supplies are tight, and current prices reflect that. Kumara is expected to run out at Christmas, too, because much of the crop was damaged by Cyclone Gabrielle.

"We should start seeing the new crop in February, which I'm sure many New Zealanders are looking forward to."

Due to Foodstuffs suppliers' investment in new techniques and technology, berries are also in season, with blueberries already in good supply. Blueberries are tipped to have a bumper season as El Niño kicks in before peak blueberry season in mid-January.

Quin stated that some dairy essentials were also down in price at Foodstuffs stores in October compared to last year, namely butter (down 9.6 percent) and cheese (down 5.7 percent).

"Our co-ops know how important these products are to our customers, families in particular, which is why we're working hard to buy well and running our co-ops as efficiently as possible to keep our prices as sharp as possible."

Yesterday, the latest Infometrics-Foodstuffs NZ Grocery Supplier Cost Index showed a further slowing in the average rate of cost increases from suppliers to Foodstuffs supermarkets across 60,000 products, at 5.4 percent pa in October 2023, compared to 6.1 percent pa in September.

Infometrics said over 5,500 items (9.2 percent) had risen in cost in October 2023, more than triple the amount in October 2020. Promisingly, produce costs had fallen again, particularly for salad ingredients like lettuce, tomatoes and cucumbers, reducing their annual rise to 6.2 percent, the lowest in two years.

Foodstuffs' data on the focused group of products in Stats NZ's FPI basket shows
suppliers charged 7.3 percent pa more in October, on average in those categories, than they did a year ago, no change from the 7.3 percent rise seen in September.

Quin continued that flattening the supply cost trend may be related to the stickiness of inflation in some global commodities.

"The World Bank's latest Commodities Price Data shows food is still higher than its 2021 average, before Ukraine; and well above 2020, before inflation kicked off after Covid-19."

However, promisingly, most grains have fallen back from last year's highs: wheat, maise, and soy. But rice, nuts, sugar, and cocoa are still well up, those last two being bad news for chocolate lovers.

Shipping prices have continued to decrease, and we saw fuel costs dip in October, too, certainly since October last year. However, diesel prices are still elevated compared to the rolling average for the year, and a fresh challenge is third-party transport providers raising their general rates, some by up to seven percent, which our suppliers will be exposed to and which may become another pressure point on retail prices.

"We'll keep talking with our suppliers and store owners about ways to keep fighting inflation's effects. The trend is steadily downwards, but there's still a lot of work to do."