Statistics New Zealand's Food Price Index (FPI) shows food prices increased 12.5 percent for June 2023 compared to a year ago.
Chris Quin, Foodstuffs New Zealand managing director, said that the food sector faced complex challenges due to record inflation. However, the pace and intensity of rising costs that growers, manufacturers, and retailers had seen showed signs of easing.
Commenting on the latest food price inflation figures released by Statistics New Zealand today, Quin said after the supply shocks of early 2020, record cost increases were beginning to moderate. Still, it would take time for this to flow through to customers.
"The inflation battle is far from over. Our two co-operatives remain focused on buying well and running our businesses as efficiently as possible so our local grocers can deliver the best value for our customers at the checkout," said Quin.
This remains Foodstuffs' number one focus. The economic forecasts all point to the resilience of some of the underlying pressures and factors that are driving inflation, and they will be tough to shift. This means the remainder of 2023 will continue to be challenging for New Zealand businesses and consumers.
On the shop floor, customers can find value by shopping seasonally, and canned and frozen goods continue to offer value and consistent pricing for customers.
Green vegetables like broccoli were in strong supply in June and offered good value. Through June, mandarins were down 2.3 percent pa (per annum), cucumbers were down 15.8 percent pa, and white button mushrooms were down 2.2 percent pa. New season avocado was also dropping in price as supply has picked up.
Customers surveyed as part of Foodstuffs' quarterly Customer Insights research said they were cutting back on non-essentials (59 percent), buying fewer items (43 percent), sticking to a budget (35 percent) and shopping around for the best deals (40 percent). With a slow economic recovery predicted, the way customers shop now to stretch their budgets further will continue for longer.
Over the next 12 months, 48 percent of mortgage debt will come off a fixed rate (26 percent within the next six months), and 54 percent of customers anticipate a sizeable financial impact on their finances.
"It's a tough winter for New Zealanders working through the hard economic realities of a recession, and the cost of groceries remains the biggest concern. All of our grocers are aware of it right across the country."
This month's Infometrics-Foodstuffs New Zealand Grocery Supplier Cost Index showed over 4,000 items increased in cost in June 2023, about two and a half times the number in June 2020. The latest result is still among the top 20 months for the highest number of items increasing in cost.
Quin continued that the co-operative saw the impact of record input cost pressures was still making its way through the supply chain. Raw materials, freight and wages remained the most significant contributors to supplier cost increases, and the co-operatives are battling many of these same pressures.
"The sustained level of supplier cost increases and other additional underlying cost pressures has meant we've come in slightly above supplier cost increases on the same product categories measured in the FPI basket this month."
Shipping remains a challenge. The supply chains are slowly returning to normal after the pandemic, but while 'per container' shipping costs dropped by 32 percent in May compared with the previous year, they remained 86 percent higher than in May 2019. Container usage costs have also eased yearly but are still significantly higher than in May 2020.
Diesel prices have been stable for the last six weeks, but the end of the Government's fuel subsidy on 30 June will impact prices in the coming months. The ongoing wet weather continues to cause slips, road closures and detours in multiple eastern and northern areas, making getting supplies into some stores challenging.
"The weather also impacted the supply of lettuce and leafy greens, and prices will likely remain high for the foreseeable future. Kumara is also in short supply, with high prices (up 168 percent pa)."
The supply-side shock factors that initially spiked food price inflation are moderating, yet the underlying causes of domestic inflation will make the fight more challenging for longer. Domestically, wild weather is still one of the significant challenges for growers.
"What we're seeing in the major overseas grocery markets is a similar battle to overcome 'sticky inflation'."
Quin concluded that a joint effort was needed to address the underlying drivers of domestic inflation to ease the record pressure on households. Foodstuffs are clear on its role in helping grocers deliver value at the checkout, and the co-operative holds itself to account both internally and externally.
