Whereas the main focus has been on the position of grocery store earnings in driving inflation, particularly on account 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 client value index (CPI) figures for January from the Australian Bureau of Statistics (during which, to the trend of the Monetary Evaluate, the anticipated seasonal bump in inflation didn’t materialise) illustrated the persevering with inflation stress in housing, insurance coverage — an space we’ve written about 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 truth 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 contemporary meals: meat, seafood, and fruit and greens. In truth, meat and seafood costs really fell 2% throughout the 12 months. 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 responsible for pricer meals groceries?
It’s not a matter of world meals costs. World wheat costs have fallen greater than 25% from their most up-to-date excessive final July, which makes bread inflation puzzling. If you happen to evaluate the present value of round US$5.68 a bushel with the post-Ukraine invasion peak two years in the past, then the worldwide value has greater than halved in that point. World 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, comfortable drinks and juices and fruit juices going up? Cocoa is presently 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 numerous prices as nicely, together with their very own revenue margins. Within the instances 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 comfortable 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 would possibly discover themselves beneath, or the pressures on Australian retailers. They’re “take it or depart it” value 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 in the present day.
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 12 months Carrefour instructed PepsiCo it merely wouldn’t inventory its vary of snack meals and drinks on account of “unacceptable value rises”.
It’s attainable Coles and Woolies would do rather a lot to boost their battered reputations in the event that they instructed their customers they have been following Carrefour’s instance and easily refusing to hold the merchandise of gouging multinationals. Shoppers is likely to be joyful to get on board with that. You by no means know.