Coffee, ready meals push food inflation to record levels

Food prices rose 15.7 per cent in the year to April, the biggest annual increase in records going back to 2005, the British Retail Consortium (BRC) said today (2), adding that lower prices are on horizon.

Overall inflation among BRC members dropped to 8.8 per cent from March’s 8.9 per cent as price increases for non-food items slowed due to heavy discounting of clothing, footwear and furniture.

Costlier coffee beans and more expensive packaging and production of ready-meals pushed up food inflation, but prices of butter and vegetable oil were starting to decline.

Fresh Food inflation accelerated in April, to 17.8 per cent, up from 17.0 per cent in March. Ambient Food inflation accelerated to 12.9 per cent in April, up from 12.4 per cent in March.

Reacting to the figures, BRC Chief Executive Helen Dickinson said that the knock-on effect from increased production and packaging costs meant that ready meals became more expensive and coffee prices were also up due to the high cost of coffee beans, as well as key producer nations exporting less.

“Meanwhile, the price of butter and vegetable oils started to come down as retailers passed on cost savings from further up the supply chain.

“We should start to see food prices come down in the coming months as the cut to wholesale prices and other cost pressures filter through,” BRC Chief Executive Helen Dickinson said.

Mike Watkins, Head of Retailer and Business Insight, NielsenIQ, said that in recent weeks, more retailers have used loyalty schemes or money off promotions to help stimulate sales.

“However, with inflation yet to peak and sales volumes in decline in many channels, it’s difficult to second guess the strength of consumer confidence. Given the falls in disposable income we really need to see CPI back into single figures and a slowdown in food inflation to test shoppers` willingness to spend.”

Britain’s official measure of consumer price inflation peaked last October at 11.1 per cent, its highest in more than 40 years. Since then it has fallen more slowly than the Bank of England expected and remained above 10 per cent in March.

The Office for National Statistics’ measure of food price inflation – which is calculated differently to the BRC’s – was the highest since 1977 in March at an annual 19.1 per cent, reflecting higher costs for biscuits, cakes and confectionery.

Last week, market research company Kantar said it estimated that grocery inflation dropped to 17.3 per cent in the four weeks to April 16, down from 17.5 per cent a month earlier, but said it was too soon to be sure that inflation had peaked.

The BRC data was based on prices collected from April 1-7. Britain’s food retailers have said they expect prices to rise over 2023 on an overall basis but with the rate of inflation declining through the year and with deflation for some products which have seen the sharpest rises.