Foodstuff released its analysis of the FPI data between May 2022 to July 2023.
New Zealand managing director, Chris Quin, said that although co-operative was still operating in a challenging market, with multiple factors driving inflation, July was the third month in a row that price increases in stores on the identical product categories measured in the FPI basket were slower than the month before, after the peak in April.
According to Quin, while food price inflation remained high, as seen through the latest food price inflation figures released by Statistics New Zealand, it was encouraging to see cost and price pressures moderating.
“It takes time, usually months but often years, for shocks and shortages to work their way through the supply chain and impact shelf prices, and that’s what we’ve been seeing over the past two years,” said Quin.
Statistics New Zealand's latest monthly Food Price Index (FPI) showed that food prices were up 9.6 percent pa in July 2023 compared to the same time last year, while Foodstuffs’ retail price increases for the same product categories measured in the FPI basket rose an average 7.3 percent pa.
“The annual rate of price increases has returned to where we were almost a year ago.”
Quin continued that raw materials, freight, and staffing were the largest contributors to supplier cost increases, with the co-operatives working hard to ensure customers could find value in core products.
“We’re still facing a significant volume of cost increases from suppliers, but the level of the increases fell this month, which is encouraging.”
Due to this year’s wet weather, leafy greens continue to face challenges, meaning prices will likely stay higher into the foreseeable future. Foodstuffs data showed the most significant year-on-year increases were for orange kumara (up 185 percent pa), brown onions (up 45 percent pa) and bananas (up 15 percent pa).
Green vegetables like broccoli and leeks had been in good supply in July and therefore offered customers the best value. Year-on-year, the most significant price decreases were for avocados (down 42 percent pa), tomatoes (down 24 percent pa) and cabbage (down 19 percent pa).
Looking ahead, Quin said customers should see further reductions in pricing on covered crops such as capsicums, tomatoes, and cucumbers as light levels increase and warmer weather settles in.
The release of the latest FPI figures follows the release of the Infometrics-Foodstuffs New Zealand Grocery Supplier Cost Index, which showed suppliers raised the cost of more than 6,500 goods in July, the highest monthly total since February. In particular, offshore increases in rice, cocoa and sugar cost impacted local prices during the month.
However, the index also showed annual cost increases were trending down, with July being the fifth month they had moderated, albeit still at a pace that well-exceeds pre-pandemic levels.
Quin said New Zealand couldn’t escape the globalised nature of modern commerce. Any major shifts in offshore supply and demand, or price rises in raw ingredients, materials or transport costs, would ultimately impact what New Zealand pays at the checkout.
“That said, Foodstuffs will keep doing what we can to keep prices down – buying well, partnering with suppliers, and running our businesses as efficiently as possible. All so we can help beat inflation.”
According to Foodstuffs' latest quarterly Customer Insights Survey, the downward trend it has seen in costs and prices comes as its customers’ financial pessimism showed signs of easing slightly too.
Foodstuffs’ online survey of more than 1,500 customers in July found 59 percent expected their financial position to improve or stay the same over the coming year (up from 50 percent in April), including 25 percent who expected things to improve (up from 21 percent). Conversely, 41 percent expected their position to worsen (down from 50 percent).
Fewer customers named inflation as one of their main concerns, too, at 23 percent (down from 30 percent in April), although the cost of food and groceries was still their top concern, at 72 percent (down from 75 percent in April).
Most of those surveyed viewed higher petrol prices, higher shipping and freight costs, and the increased cost of goods from suppliers as the major contributors to increasing food prices.
Quin added that the two Foodstuffs co-operatives (North Island and South Island) are closely monitoring customer sentiment and responding accordingly.
“The current inflationary environment is affecting our customers’ spending habits. They’re cutting back on non-essential items, switching to private label brands like Pams and Value, and buying more frozen goods, less alcohol and less meat.
“It’s positive that we’re starting to see signs that customer sentiment and inflation figures are turning a corner, but both have a long way to go before we return to normal.”
With weather still being the wild card here in New Zealand, everyone across the industry is hopeful that growers will have some respite as the nation heads into Spring, to boost supply and ease the cost of fresh fruit and veggies, which have significantly contributed to food price inflation.
