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UK food inflation hits record 14.7%, with worse to come – business live | Business

Grocery price inflation hits record 14.7%

Supermarket inflation in the UK has soared towards 15%, driving up the average bill by £682 per year.

Grocery prices were 14.7% higher than a year ago in October, Kantar Worldpanel reports, as shoppers continued to be hit by rising costs.

That’s the highest reading on record, and means shoppers would face paying an extra £682 per year if they didn’t trade down to cheaper items, or simply not buy as much.

Prices are rising fastest for items such as margarine, milk and dog food, reports Kantar.

Worryingly, Kantar cautions it’s ‘still too early to call the ceiling’ on rising prices.

Sales of own label sales rose by over 10%, as people tried to save where possible, while the branded goods market grew far slower at 0.4%.

Kantar food inflation 14.7% in 4 weeks to Oct 30, a new record and possibly not the peak

Usual caveats: this compares like products with like, and doesn’t represent inflation at the till as it doesn’t allow for downtrading, economising etc

— Jonathan Eley (@JonathanEley) November 8, 2022

Here’s Fraser McKevitt, head of retail and consumer insight at Kantar:

“Yet again, we have a new record high figure for grocery price inflation and it’s too early right now to call the top.

Consumers face a £682 jump in their annual grocery bill if they continue to buy the same items and just over a quarter of all households [27%] now say they’re struggling financially, which is double the proportion we recorded last November.

Nine in ten of this group say higher food and drink prices are a major concern, second only to energy bills, so it’s clear just how much grocery inflation is hitting people’s wallets and adding to their domestic worries.”

Sales of Halloween items were down this year, while 32% fewer shoppers have bought their Christmas pudding than this time last year.

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Sales of the very cheapest value own label ranges have jumped by 42% year-on-year, as cash-strapped shoppers traded down.

Kantar’s Fraser McKevitt explains:

These items currently represent just under 3% of the market, although retailers have been adding new products in recent months, so it will be interesting to see if this continues.”

Aldi and Lidl see fastest growth

Shoppers continued to flock to discount supermarkets.

Aldi was the fastest growing retailer in October, increasing its sales by 22.7% year on year to now hold a 9.2% market share.

Lidl boosted sales by 21.5% to take its market share to a new record high of 7.2%.

In contrast, Tesco’s sales grew 3.1%, while they fell 1.9% at Waitrose and by 4.6% at Morrisons.

Aldi and Lidl now make up 16.4% of the UK market, versus 4.4% 14 years ago.

🛒💷 Cost of living supermarket update: ⁰Own-label sales jumped by 10.3% in October. Branded products grew far slower at 0.4%. 
People switching from Heinz, Kellogg’s, Kingsmill etc to supermarket labels in attempt to save costs.
[via @Kantar_UKI]

— Harry Wallop (@hwallop) November 8, 2022

Grocery price inflation hits record 14.7%

Supermarket inflation in the UK has soared towards 15%, driving up the average bill by £682 per year.

Grocery prices were 14.7% higher than a year ago in October, Kantar Worldpanel reports, as shoppers continued to be hit by rising costs.

That’s the highest reading on record, and means shoppers would face paying an extra £682 per year if they didn’t trade down to cheaper items, or simply not buy as much.

Prices are rising fastest for items such as margarine, milk and dog food, reports Kantar.

Worryingly, Kantar cautions it’s ‘still too early to call the ceiling’ on rising prices.

Sales of own label sales rose by over 10%, as people tried to save where possible, while the branded goods market grew far slower at 0.4%.

Kantar food inflation 14.7% in 4 weeks to Oct 30, a new record and possibly not the peak

Usual caveats: this compares like products with like, and doesn’t represent inflation at the till as it doesn’t allow for downtrading, economising etc

— Jonathan Eley (@JonathanEley) November 8, 2022

Here’s Fraser McKevitt, head of retail and consumer insight at Kantar:

“Yet again, we have a new record high figure for grocery price inflation and it’s too early right now to call the top.

Consumers face a £682 jump in their annual grocery bill if they continue to buy the same items and just over a quarter of all households [27%] now say they’re struggling financially, which is double the proportion we recorded last November.

Nine in ten of this group say higher food and drink prices are a major concern, second only to energy bills, so it’s clear just how much grocery inflation is hitting people’s wallets and adding to their domestic worries.”

Sales of Halloween items were down this year, while 32% fewer shoppers have bought their Christmas pudding than this time last year.

The next few months will highlight the extent of the high street’s polarisation, flags Sophie Lund-Yates, equity analyst at Hargreaves Lansdown:

“Primark is experiencing significant cost inflation and a very uncertain demand backdrop. Despite this, it’s vowed to keep prices steady following a recent round of increases.

This is an integral part of the group’s ability to keep customers coming through the doors. Without being the affordable name on the high street, Primark loses almost all its bargaining power. Primark is well aware that pushing prices too far will do nothing but alienate its core customers.

The launch of a click and collect trial will be lauded by fans of the shop, which despite recent revamps, still leaves a lot to be desired on the website front. While disappointing, it’s the lack of large scale delivery infrastructure that helps Primark keep its prices at attractive levels.

Associated British Foods financial results Photograph: Associated British Foods

Primark has “found its feet again”, says Richard Hunter, head of markets at interactive investor, as UK shoppers have flocked back to its stores.

Its operating profit margin of 9.8% is above expectations, while the strength of trading at its UK stores has more than offset a weaker performance in Europe, where consumer confidence has dragged.

AB Foods is mindful of the mood music, and has decided to make no further price increases in its stores in addition to the ones already announced for the next two shopping seasons.

Although Primark’s trading was strong in the UK and the Republic of Ireland, it remained below pre-pandemic levels in Continental Europe.

ABF explains:

Consumer confidence [in Europe] was generally weaker and market data for some markets indicate that the total apparel market was still well below pre-Covid levels.

Trade was affected by the exceptionally hot summer months and with colder weather we have seen many markets improve.

Primark has achieved “impressive results against the harsh economic backdrop”, says Richard Lim, CEO of Retail Economics:

ABF’s results show that Primark more than doubled its adjusted operating profits in the year to 17 September, to £756m, as customers returned to high streets and retail parks.

Lim says Primark, with its focus on affordable clothes, could be in demand as customers look to cut spending:

The retailer is well-positioned to benefit from consumers who are trading down and putting lower costs at the heart of their buying decisions.

Many shoppers are prepared to sacrifice perceived quality and the convenience of online delivery for lower costs and it’s driving people back into stores across parts of the sector.

“However, there’s a perfect storm of cost pressures facing the retailer from spiralling input and operating costs and the impact of a weaker pound and rising interest rates.

Resisting further price increases this year (beyond those in the pipeline) will help Primark protect and build market share in the longer term, Lim adds:

It’s inevitable that margins will be hit, but they are likely to weather the storm better than most with a value-driven proposition and diversified business as the economy enters recession.”

UK retailers braced for tough Christmas as shoppers feel squeeze

Larry Elliott

Larry Elliott

Britain’s retailers are bracing themselves for a tough Christmas trading period as hard-pressed consumers react to a worsening cost of living crisis by cutting back on spending.

The monthly snapshot of spending by Barclaycard, which accounts for half of debit and credit card transactions, found that 50% of consumers were planning to tighten their belts this Christmas, cutting back on presents, food and drink, and socialising.

Esme Harwood, a director at Barclaycard, said:

“Rising petrol and supermarket costs continue to bite but Brits are spending less on energy bills as government support kicks in and people find ways to economise at home.

Consumers continue to swap big nights out for cosy evenings in as they reduce their discretionary spending, while health and beauty, and home improvements enjoy a little boost.”

Two in three consumers (66%) were finding ways to save energy at home to reduce the cost of their gas and electricity bills, Barclaycard found. Many of those were wearing more layers at home (63%), while 56% were avoiding using central heating unless absolutely necessary.

Primark to hold prices to ‘stand by customers’

With consumer disposable income falling due to soaring inflation, Associated British Foods has decided not to bring in further price increases on Primark’s autumn/winter and spring/summer ranges (beyond those already implemented or planned).

George Weston, chief executive of Associated British Foods, explains:

Primark has faced significant input cost inflation and sharply moving currency exchange rates.

We have decided to hold prices for the new financial year at the levels already implemented and planned and to stand by our customers, rather than set pricing against these highly volatile input costs and exchange rates.

Introduction: Primark owner facing ‘highly volatile’ input costs and exchange rates

Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.

With its grocery, sugar, agriculture, ingredients and retail divisions, Associated British Foods is a solid bellwether of economic conditions.

And this morning, the owner of the Primark clothing chain has warned that it faces rising costs, just as the cost of living crisis hits spending.

In its full-year results, ABF says it faced cost inflation across an unprecedented range of inputs in the last year, even as profits bounced back as the impact of Covid-19 faded.

Chairman Michael McLintock estimates that inflation pushed up costs across the Group by some £1bn in this year alone in the last year.

He says ABF:

…encountered the most challenging economic conditions for many years with sharply rising and broadly based inflation, as well as highly volatile input costs and exchange rate.

And he adds:

Although hard work has successfully recovered much of this cost inflation, more remains to be done.

Primark faces a range of challenges. ABF says input cost inflation is expected to be significant in the year ahead, due to rising raw materials and energy costs, and higher wages.

The firm also faces higher purchasing costs which have resulted from the strengthening of the US dollar against sterling and the euro.

In the 12 months to 17 September, sales at Primark were 43% higher than last year, at £7.7bn, as its shops reopened after pandemic lockdowns.

ABF made a statutory profit before tax for the last year of £1,076m, up 48%.

For the year ahead, ABF expects significant sales growth across the busines, but expects a fall in adjusted operating profits and adjusted earnings per share, due to those higher costs.

ABF – Primark ugly vs rest of diversified / great food etc business “substantial and volatile input cost inflation will be the most significant challenge in the new financial year…Primark has faced significant input cost inflation and sharply moving currency exchange rates” pic.twitter.com/QFD8PtxApY

— Chris Bailey (@Financial_Orbit) November 8, 2022

Some retailers have launched their Christmas adverts early, to help customers spread the cost of the festive season (and to drum up extra demand, no doubt). But there are signs that households are cutting back this year.

Retail sales grew by just over 1% in value year on year in October, according to the latest survey from the British Retail Consortium (BRC). With inflation at around 10%, that means sales volumes fell as shoppers bought fewer items per visit.

Online retailers saw sales decline in every category, apart from furniture, as consumers looked for bargains on the high street and retail parks.

BRC chief executive Helen Dickinson said people have been snapping up electrical items to help them through the energy crisis:

“With November Black Friday sales just around the corner, many people look to be delaying spending, particularly on bigger purchases.

“Clothing and footwear, which saw stronger sales this year, declined as the mild weather meant customers held back on buying winter outfits. Meanwhile, electric blankets, air fryers and other energy-efficient appliances continued to fly off the shelves as people sought future cost savings.

The agenda

  • 7.45am GMT: France’s trade balance for September

  • 8am GMT: Kantar supermarket sales report for October

  • 10am GMT: Eurozone retail sales

  • 12pm GMT: NFIB index of US business optimism

  • 12pm GMT: Russia’s monetary policy report



https://www.theguardian.com/business/live/2022/nov/08/primark-higher-costs-cost-of-living-squeeze-supermarkets-christmas-food-business-live UK food inflation hits record 14.7%, with worse to come – business live | Business

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