Trolley costs continue to speed ahead

Trolley costs continue to speed ahead

FMCG SUPPLIER NEWS

Business Live - Dec 19th 2011, 08:36

Food prices continue to soar ahead of Christmas, and there is no stopping the trend. 

Consumers may be ready to shop, but they will have to pay more for food. And while retailers all claim fairly low single-digit "internal inflation", official food inflation is now well over 10% - and inflation on a Business Times basket of goods is even higher.

It shows that since February, the price of beef at South Africa's major retailers has gone up by almost 20%, while maize meal is up 40% and onions 20%.

Coffee is more than 10% up and eggs cost almost 15% more than 10 months ago.

Comparing current prices to just three-and-a-half years ago, the price of bread has increased by 77%, beef 66%, tea 49%, maize meal 53% and sugar 57%.

Mike Prentice, group marketing executive for Spar, said that food inflation at Spar was about 3.5% for the year to September, but from July to September it jumped to about 7%.

"We don't accept price increases from manufacturers from November, so we expect big hikes from the middle of January," said Prentice.

One of the big problems is the price of maize and its knock-on effect, particularly on chicken, pork and beef.

The Shoprite Group's internal food price inflation stands at 4.5% for the year so far. But director Brian Weyers said rising inflation on food commodities on the international markets was putting pressure on prices.

"The volatility of international currencies and exchange rates makes it impossible to speculate on percentage increases for the future," he said.

A report from Absa Capital says food inflation was 11.1% in November. Meat prices contributed most to the increase. The prices of bread, cereals and fruit have also soared.

The report says that anecdotal price evidence suggests there will be an increase in consumer price index food prices in December.

Absa expects food inflation to peak at 15% in the second quarter of next year.

Lumé Kleynhans, manager of agricultural insights at Standard Bank, said: "Average prices over the past decades might have been seen as relatively affordable, but over the next decade food prices will be at a much higher level than in the past."

Some commodity prices have increased significantly, including livestock and grains.

If the agricultural sector received support to increase production, including supportive policy, it would relieve some challenges that farmers face and stimulate increased productivity - to the advantage of both the farmer and the consumer, said Kleynhans.

For the year to September, the National Agricultural Marketing Council's data indicates that, of about 97 items, more than 50% recorded growth in excess of 6% while 21% increased by more than 15%.

Among these products, a 500g margarine brick cost more than 30% more.

"Even wealthy consumers are realising their grocery bills are higher than they used to be," said Kleynhans.

Azar Jammine, chief economist at Econometrix, said the price of maize increased from R1300 a ton a year ago to R2500 a ton now - "and is rising".

The prices reflected in the accompanying graph reflect an average of prices at four supermarket chains. The most expensive (adding up all the products listed) was Woolworths, followed by Spar and Checkers. Pick n Pay was the cheapest.