Pressure on food chain

Inflation drives up supermarket prices

WOOLWORTHS boss Brad Banducci said food inflation at his supermarkets accelerated to 7.3 per cent over the first quarter, led by double-digit hikes in fruit and vegetables due to poor weather, but held out hopes crippling inflation would start to moderate soon.

As the mounting cost of living piles up on consumers driven by now rampant food inflation running through the economy as well as higher energy prices, there has also been a continued switch in consumer spending, with Woolworths customers opting for cheaper foods.

And the upward pressure on fresh fruit and vegetables, or shortages, could get worse with some growing seasons for key supermarket foods like cherries and some fruits delayed by the wet spring and cold weather.

There were concerns about stone fruits coming out of the key northern Victorian growing area around Shepparton, which has been hit by floods, while poorer potato harvests could threaten chip supply.

Woolworths on Thursday unveiled its first quarter trading performance, with total sales down 1.8 per cent to $16.36bn, but all eyes were on its report of inflation and the outlook for food supplies.

The nation’s biggest supermarket chain said average prices increased 7.3 per cent compared to the first quarter of 2021 and was fuelled by double-digit inflation in fruit and vegetables. The price hike was triggered by inclement weather, as well as inflation in red meat, driven by higher commodity prices, and dairy products driven by higher milk farm gate prices. In long life, inflation was mainly driven by higher supplier cost price increases due to industry-wide input cost pressures.

The faster pace of food inflation at Woolworths was also mirrored by Coles, which last month reported its first quarter trading and said inflation had been particularly strong in fresh food with prices up 8.8 per cent for the period, driven by key food items across wheat, bakery and fruit. Total supermarket price inflation of 7.1 per cent was recorded for the first quarter at Coles.

The rising prices paid at the checkout for food and groceries is growing as a tightening vice around household budgets and comes amid rising energy prices and mortgage rates.

Mr Banducci said inflationary pressures were witnessed across the supermarket aisle, which was an unusual phenomenon, but he hoped it would start to moderate.

“At the full-year one of the things that really struck us was every (food) category had a different story, but all of them were in inflation, it was quite unusual, because normally you can get a balance in the basket, some areas are inflation and some are not. So it was quite acute,” Mr Banducci said. “And that still continues, but we do believe in the next quarter inflation will start to moderate.”