Supermarkets facing higher costs from grocery suppliers

Grocery costs for supermarket co-operative Foodstuffs have increased rapidly since April last year and are a significant driver of higher grocery prices for consumers, according to a new report.

The Grocery Supplier Cost Index, which measures the cost of more than 60,000 grocery products supplied to Foodstuffs, which includes New World and Pak ‘n Save supermarkets, showed the cost of groceries from suppliers rose at an annual pace of 7.9% in July, up from 7.1% in June, and 1.7% in July 2019.

Supermarkets have been under the gun as consumers balk at the higher cost of staples like butter, meat and fresh produce as wages fail to keep pace with rising inflation. However, the index shows the country’s largest grocer has been facing its own cost pressures as suppliers raise prices across the board.

‘‘The index helps show how the cost of grocery goods is increasing across the country, as suppliers face a tight labour market, rising prices for various inputs, higher transport costs, and global and local pressures,’’ said Brad Olsen, principal economist at independent consultancy Infometrics, which was commissioned by Foodstuffs to produce the index.

Olsen didn’t anticipate a slowdown anytime soon.

‘‘The fact that the grocery supply cost index has continued to accelerate even further does suggest that there’s still a lot of cost pressure down the pipeline and we know looking at the various drivers that input costs to suppliers is still there,’’ he said. ‘‘We are still in an inflationary environment, so we are going to continue to see those cost increases.’’

The latest data for July showed the supermarket group’s cost of fruit and vegetables from suppliers increased 16% while the cost of butchery products increased 9.5%, seafood rose 9.3%, and chilled foods lifted 8.5%.

All departments recorded annual increases in costs compared with July last year. Foodstuffs has said supplier costs are the major component of product prices in supermarkets, making up about 68% of the onshelf price.

Olsen said more products from suppliers were increasing in cost, and with larger rises.

Just 3127 of products faced price increases from suppliers in July 2019, before the Covid-19 pandemic. That compares with 7059 products in July this year.

‘‘The number of items increasing in cost in July 2022 is more than double the number of items back in July 2019, prior to the pandemic,’’ Olsen said.

‘‘Cost increases are also becoming larger, with 8.8% of all items that changed cost in July 2022 increasing by 20 to 80% – well above the 7.2% recorded in July 2019.’’

In an email sent to Foodstuffs staff and supermarket owners, the co-operative’s North Island chief executive Chris Quin and South Island chief executive Mary Devine said they commissioned the index to improve understanding about the major factors driving pricing.

‘‘This is a critical piece of the puzzle when it comes to understanding the retail price of goods on shelf and what’s driving any changes,’’ they said.

‘‘We’re acutely aware of how tough this inflationary environment is making life for many. The last few months have been tough for all New Zealanders, with households and businesses facing rising costs across the board.

‘‘The extraordinary times we’re in are driving up the price of everything for our customers and our suppliers. From food to fuel, electricity, rent, mortgages, broadband and airfares – inflation keeps broadening. And unfortunately, the rest of 2022 looks set to remain challenging for households both here and around the world.’’

The co-operative said prices on its supermarket shelves had lagged behind food price inflation for the last two months as supermarket owners held prices in their stores.

The Stats NZ food price index showed prices increased 6.6% in June from a year earlier. Foodstuffs said the average cost increase from its suppliers on the same basket of goods was 6.8%, while the increase passed on to Foodstuffs’ customers was 5.5%.

In May, retail prices to Foodstuffs’ customers increased 4.7%, lagging behind food price inflation of 6.8% and supplier cost price increases of 6.9%, the co-operative said.

A New Zealand wellness brand is looking to expand its offerings in the United States after a successful exclusive launch on Amazon.

Eve Wellness, a hormonal supplement brand for women, spent 11 months planning and preparing to launch its Take Me To The Pill supplement on Amazon in June.

The pills are designed for anyone using hormonal contraception such as the pill, IUD, depoprovera or implant, or wanting to come off it and replenish the nutrients depleted by birth control.

General manager Beatrice Thorne said the brand spent months working with Amazon experts to learn about the marketplace, perform extensive research into market sizes and opportunities on the platform.

‘‘Market entries can be highcost investments and being a smaller business we don’t yet have the luxury of a multimilliondollar entry strategy,’’ Thorne said.

By launching one product to start with, Thorne said the brand was able to learn a lot.

This month, it would launch the Nz-best seller Period Pal, followed by another product this year, and a further three in January. ‘‘We’re also currently preparing to bring our wholesale strategy to life . . .’’