You don't need to be an economist to know food and drink prices are rising sharply - anyone doing a regular supermarket shop will have felt the pinch at the checkout.
Shop prices grew at the fastest rate in more than a decade during May, food inflation was up 4.3% in May from 3.5% in April, the highest level since April 2012. As International Search specialists operating across the Food and Beverage sector, Connect Search is taking a look at how food price inflation is changing consumer behaviour. Read on to find out more.
Most economists agree this is a result of the world economy opening up again after the pandemic, and a sign that demand is outstripping supply. Connect Search also recognises a range of other factors, such as labour shortages, supply issues and administrative burdens, that have also played a part. And now the war in Ukraine is likely to send prices soaring further and for longer with commodities such as wheat, fertiliser and sunflower oil particularly affected.
Helen Dickinson, chief executive of the British Retail Consortium, said: “Fresh food inflation hit its highest rate in a decade, with items like poultry and margarine seeing some of the largest increases due to soaring costs of animal feed and near-record global food prices. Retailers have been working hard to protect their customers from these rising costs, particularly at a time when households are being impacted by a huge rise in household energy bills.”
Shoppers’ personal inflation will depend on what they buy, when they buy, where they shop and a range of other factors. People with the ability to shop around, buy in bulk and adapt their behaviour are likely to be able to control how much inflation affects them more than those who can’t. A recent survey found 43% of people bought cheaper groceries in response to rising prices and 35% bought extra items when they were on promotion. Worryingly though, 19% have gone without some foods, 10% have skipped meals, 7% have prioritised meals for other family members and 3% have used a food bank.
Different supermarkets have different supply chains and contractual obligations which may mean some find it easier to minimise costs than others. For example, Morrisons is the UK’s largest fresh food manufacturer which may mean it finds it harder to switch suppliers than some other supermarkets. In April it warned its profits were likely to take a significant hit this year due to inflation and supply issues.
Some of the methods supermarkets use to manage inflation include fewer discounts, smaller products (at the same price) or smaller savings on sale items. And of course, some supermarkets and lines of products will be able to better absorb increases in costs before passing them on to shoppers directly.
As Food and Beverage Executive Recruiters, Connect Search understands the rate of inflation is likely to keep rising this year. But we expect it to fall next year and be close to 2% in around two years. That’s because the causes of the current high rate of inflation are not likely to last. But even though inflation will slow down, the prices of some products may stay at a high level relative to historical prices.
The impact of such change in the executive search market is becoming clear. There was already significant activity across retail and manufacturing groups looking to embed next generation technology and processes to drive the efficiency of end-to-end supply chains. The fight to ensure consumers do not bear too much of the cost-of-living increase has only heightened the need for businesses to ensure they have the right talent to drive change and stay competitive.
If you’d like to learn more about the latest trends in the Food and Beverage space, please don’t hesitate to get in touch with Connect Search today. Speak to one of our industry specialists on +44 (0) 1908 760 410 or head to our Contact Us page.