Whereas the main focus has been on the position of grocery store earnings in driving inflation, particularly because of the “exposé” final week by ABC’s 4 Corners, there’s an vital supply of profit-led inflation that’s past the management of supermarkets, cosy duopoly or not.
Yesterday’s month-to-month shopper worth index (CPI) figures for January from the Australian Bureau of Statistics (by which, to the craze of the Monetary Overview, the anticipated seasonal bump in inflation did not materialise) illustrated the persevering with inflation strain in housing, insurance coverage — an space we’ve written about just lately — and within the meals and non-alcoholic drinks group. At 17.18%, food and drinks is the second most vital group within the CPI, behind housing at simply over 22%. In reality from 2019, the weighting has risen from 15.75%.
The annual CPI rise within the meals and non-alcoholic drinks group rose to 4.4% in January, up from 4.0% in December and simply behind the 4.6% rise in housing. That doesn’t embrace recent meals: meat, seafood, and fruit and greens. In reality, meat and seafood costs truly fell 2% throughout the yr. However take into account the remainder of the class: meals out and takeaway meals, 5.7%; meals merchandise, 6.9%; bread and cereals, 7.4%; tea, espresso, water, juice, 5.7%.
So, are Coles and Woolies accountable for pricer meals groceries?
It’s not a matter of world meals costs. International wheat costs have fallen greater than 25% from their most up-to-date excessive final July, which makes bread inflation puzzling. In case you examine the present worth of round US$5.68 a bushel with the post-Ukraine invasion peak two years in the past, then the worldwide worth has greater than halved in that point. International sugar costs stay excessive however have come off latest peaks. Canola is again to 2020 costs. So are corn and soybeans.
And why is the common-or-garden cup of espresso, tea or cocoa, or mineral or spring water, mushy drinks and juices and fruit juices going up? Cocoa is at the moment at traditionally excessive costs, so don’t anticipate your scorching chocolate to be getting any cheaper any time quickly. However espresso costs are again to 2021 ranges; tea is at 2020 ranges.
These costs could also be set by international markets, however once they get to retailers, their processors impose loads of prices as properly, together with their very own revenue margins. Within the circumstances of those merchandise, their processors and makers are multinationals — Unilever, Nestle and JDE (Douwe Egberts and 22 different manufacturers), together with the likes of Coca-Cola and PepsiCo within the mushy drink class.
Overlook Coles and Woolies — these transnational giants dwarf the supermarkets and don’t care in regards to the pressures Australian customers of their merchandise may discover themselves underneath, or the pressures on Australian retailers. They’re “take it or depart it” worth setters and, no matter their sins, the grocery store duopoly feels they need to take it. Maybe it’s one thing for the Australian Competitors and Shopper Fee to chew over, seeing it launched the problems paper for its grocery store inquiry as we speak.
European grocery store large Carrefour, then again, has determined to depart it. After campaigning in opposition to giants like Nestlé, and Unilever over “shrinkflation”, early this yr Carrefour informed PepsiCo it merely wouldn’t inventory its vary of snack meals and drinks resulting from “unacceptable worth rises”.
It’s attainable Coles and Woolies would do loads to boost their battered reputations in the event that they informed their customers they have been following Carrefour’s instance and easily refusing to hold the merchandise of gouging multinationals. Shoppers is perhaps completely satisfied to get on board with that. You by no means know.
