When it comes to food prices in Ireland, things are going to get worse before they get better, if they ever get better. That is the stark warning from retail analysts and experts who have been following the surge in grocery prices in recent months.
They have also noted that the spike in the cost of living is having a significantly negative impact on more than just our wallets, with moods darkening across the country and more people pessimistic about what lies ahead than at any point in recent memory.
“It is not just that prices are going up, it is that we don’t know how far they are going to go up,” says Paul Moran, associate director at retail analysts Kantar. “And we now have a generation of people out there who have never experienced inflation before and for them this is not only a financial hit but an emotional one.”
He notes that when Kantar asked people what was the most pressing issue for them last October, 53 per cent identified the cost of living. By January it had jumped to 62 per cent. “Now it is at 81 per cent and 43 per cent of people believe they are going to be worse off this time next year than they are now and the last time we saw that was October 2013 when we were coming out of the recession.”
According to Moran’s research, 61 per cent of Irish consumers feel they are just getting by while only 37 per cent say they have money left at the end of the month with about 50 per cent saying they couldn’t cope with any kind of financial distress.
Retailers can no longer absorb the supply chain costs. They have been trying hard not to increase the prices but they will have to start passing them on
Retail expert and TU Dublin academic Damian O’Reilly believes things are on the cusp of getting even more grim for Irish consumers.
“It is going to get worse and you can see food inflation climbing to more than 8 per cent before the end of the year,” he says. “We will see grocery inflation at that level because input costs have not been fed through yet.”
He says retailers have been trying to delay imposing price hikes for months but suggests that we are close to a tipping point. “Retailers can no longer absorb the supply chain costs. They have been doing that for months and trying to negotiate better deals with suppliers hoping the inflations would be temporary. They have been trying hard not to increase the prices but they will have to start passing them on.”
His comments are echoed by Moran: “The energy crisis was the canary in the coal mine, the first sign of trouble and there are a lot of elements that have not flushed through the system yet and over the next few months there will be a lot more increases and that is going to put the squeeze on retailers. So if consumers are looking for discounts and promotions, they simply won’t be there.”
According to O’Reilly, people “are looking at more value, they are bringing shopping lists and they are cutting out the impulse purchases. They are moving back to cash a little bit more because they think they will spend less. And people are shopping around more – one store for veg and another store for hygiene products. We are certainly becoming more aware of where the money is going.”
Paul Kelly of Food and Drink Ireland, the Ibec umbrella group, says more and steeper price hikes are inevitable in the months ahead with feed and fertiliser costs jumping in price alongside energy, labour, transport and shipping costs.
“The way we would look at it is there is a transmission of costs through the system and these take time and when it comes to food, we are well below the rate of general inflation. But there is a head of steam building up in terms of cost and that means you are going to see more pass through to consumers.”
In recent weeks The Irish Times has been charting price shifts using a list of 25 commonly bought products. Since we last priced the basket at the end of April, the cost of some products has fallen but far more have climbed in price. All told there has been a net increase in the cost of the basket of €3.05, or marginally over 3 per cent.
We will check on these items next month to get a sense of how they are moving and what impact that will have on our pockets. If you notice any big price increases, let us know at pricewatch@irishtimes.com.
