British Supermarkets Raise Price of Food Staples


Supermarkets have risen their prices on popular staples in the UK blaming Brexit for the cause.

British Supermarkets Raise Price of Food Staples

  • ADDED
  • 3 years ago

Supermarkets have risen their prices on popular staples in the UK blaming Brexit for the cause.

Supermarkets in Britain have raised the prices of their most popular staples, milk and bananas, increasing the prospect of other price hikes to account for Sterling's post-Brexit devaluation. In Lidl and Aldi a 4-pint bottle of milk has gone up from 95p (€1.12) to 99p (€1.16), a rise of 4% while a pack of bananas is up from 68p (80c) to 72p (85c). These hikes are seen as a delayed reaction to the fall in sterling, which has until now been buffered by pre-purchased, or hedged, stocks. It also comes at a time when the two German chains are losing British market-share growth momentum to a resurgent Tesco. The hope is that these price rises will be passed down the supply chain to Irish farmers who make up a considerable proportion of the British supply chain in beef and dairy.

Industry analysts expect more hikes across the board. Justin King, who ran Sainsbury's for a decade up to 2014, said he expects the consumer cost of food to rise by at least 5%. “Around 40% to 50% of what we buy is sourced abroad in a currency other than the pound, so with the current rates of exchange we could expect those things to be about 10% more expensive. And if that's about half of what we buy, then that means something of the order of 5% inflation.”

Bruno Monteyne, industry analyst at Berstein Research, thinks this is the end of the recent supermarket price war, as retailers buying future stocks feel the impact of sterling's low value.
“Gone are the days when Aldi and Lidl can respond to every price cut by the supermarkets with an equally big price cut. Discounters raising their prices upwards to the same or higher price levels than the supermarkets on the most important food products is surely a huge leap forward.”

One industry insider who works in fresh produce for supermarkets said:
“Most of us work in seasons, and we hedge a portion of our current [stock] when the season is programmed, so a portion of that risk is fixed. But since it isn't fixed at 100% (since volume from grower can vary you cannot fix volume), we are already feeling the hit from it. That hedge WILL run out at some point, especially after the current [season finishes]. So by new year, next summer the latest, that is where it will really hurt.
“Supermarket had been getting out as much as they can, as some suppliers had more hedge currency than others, most suppliers are forced to sell to them with the lower exchange rate, so currently the suppliers (us) are taking a lot of the hit now, but that will be transfer to the consumers, at some point.”

The UK imported 50,000 tonnes of Irish cheddar in 2016, down from just under 60,000 tonnes in 2015. We remain their largest foreign supplier. Our butter exports to Britain rose in 2016, from 20,000 tonnes to around 23,000 tonnes. 50% of our beef exports are to Britain.

Irish beef and dairy exporters can now hope to gain on the basis of a reality shift in Britain, as consumers will no longer be cushioned by unrealistically low supermarket prices. How much of this price boost will make it past the processors remains to be seen. It will be interesting to hear what UK Groceries Code Adjudicator Christine Tacon will have to say when she addresses the IFA next week.

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