Chris Quin, Foodstuffs North Island CEO, the 100 percent New Zealand-owned co-operative behind New World, PAK'nSAVE, and Four Square, commented on the latest food price inflation figures released by Statistics New Zealand today.
Quin said global indicators were pointing to some of the main drivers of food price inflation has reached its peak.
"The increase in the cost of goods we buy to put on the shelf and the retail price to our customers both came in under 10 percent this month," said Quin.
"Internationally, commodity prices are continuing to ease off the record highs reached in 2022, particularly for key ingredients like vegetable oil and wheat."
He continued that alongside the figures, international shipping costs are coming closer to pre-pandemic levels everywhere apart from the trans-Tasman, for the first time since the supply chain shock that began in 2020.
"Carriers are seeing reduced volumes and looking to increase their vessel utilisation."
The fuel price in May dropped slightly from what it was in April. However, the government's fuel subsidy will end on 30 June, impacting diesel prices and road user charges.
Quin added that while food price inflation remains high, Foodstuffs was hopeful it had seen the crest of the wave of record cost increases from suppliers that the co-operative has been experiencing over the last 18 months.
International cost pressures are seeing an overall downward trend. However, wages and weather in New Zealand are still fueling cost increases. This shows the cost of imported goods starting to moderate ahead of a slowdown in cost increases on domestically produced grocery items.
Quin attributed these costs to the minimum wage increase in April and the extreme weather that has continued to affect crops, including tomatoes, leafy greens, and pumpkins.
Low light and cold weather and other issues with plant health have seen tomatoes sky-rocket in price. Greens have generally remained stable, although poor weather conditions have also impacted leafy greens like lettuce and spinach.
Quin said produce such as pumpkin had been impacted by quality issues due to the wet weather, with the co-operative expecting supply to be tighter than in a usual winter. However, Foodstuffs would continue looking at imports to ease supply constraints where produce is unavailable locally.
"Produce that has been better value for customers include gold kiwifruit, green cabbages and broccoli. Avocados will also shortly be coming into season in early to mid-June."
Foodstuffs' Customer Insights data showed food and grocery prices remain the number one concern for three out of four customers. Also playing on customers' minds is the increase in crime (37 percent), inflation (30 percent) and the state of the economy (25 percent).
Customers revealed that they are buying less across all categories, except for Frozen, which has seen a net increase this quarter. The most impacted categories are discretionary or higher ticket items. More customers have stated they're cutting back on fresh fruit, vegetables, and meat and are shopping across multiple banners and channels to get the best deals.
Quin added that at the start of this year, Foodstuffs thought it would be able to see the trajectory of food price inflation by the end of the first quarter. However, unforeseen weather events have meant it's taking longer to get a clearer picture.
"But it's encouraging to see signs of moderating across the industry. As we know, predictions that inflation would be transitory were incorrect, and it will take time for easing to flow through."
In the United States and the United Kingdom, food price inflation remained high, with volatility from month to month. In the United States, food prices rose 0.2 percent in May after being unchanged for the previous months as fruits and vegetables, non-alcoholic beverages, and other food products became more expensive.
Quin said that while the cost of goods in New Zealand may be rising more slowly, they're still rising, including a continued rise of supplier cost increases.
"We actioned over 22,200 product price increases between 29 January and 31 May from over 550 suppliers."
The sustained level of supplier cost increases coupled with other underlying cost pressures has meant Foodstuffs have come in slightly above supplier cost increases on the FPI basket this month.
"It is encouraging to see the record pace of increases starting to slow. It's now three and a half years on since Covid supply-side shocks that have underpinned 30-year highs in food price inflation globally first hit."
Foodstuffs are focused on delivering value to customers and making it easy to find in-store through the winter months. To do that, the enterprise has to keep buying well and running its co-operative as efficiently as possible to support best its 550 local grocers who own and operate New World, PAK'nSAVE or Four Square stores in their communities.
