Concerns mount over retailer price wars

There are worrying signs that farmers and growers are increasingly being left to foot the bill of the latest price war between the main supermarkets.

Office for National Statistics figures out this week showed the rate of Consumer Prices Index annual inflation fell 0.2% to 5% in October, driven largely by “significant and widespread discounting by supermarkets”, plus good harvests for certain crops.

Overall food prices fell by 0.9%, the largest for a September to October period since 1996, ONS said. The largest falls were for vegetables (down 2.4%), fruit (1.6%), milk, cheese and eggs (1.2%) and meat (0.7%).

British Retail Consortium director general Stephen Robertson said the figures illustrated the price war was working for shoppers and supermarkets were cutting into “already thin margins even further” to hold down shop prices.

But the NFU’s Tom Hind said such claims would not sit well with farmers and growers. Margins had already been squeezed by higher costs and he said the union was picking up signs retailers were starting to share the burden of this discounting with suppliers, especially in the poultry and horticulture sectors.

“We know consumers are feeling the pinch and manufacturers are facing a squeeze, but we’re concerned undue pressure is being passed back down the chain. It means there’s an even more compelling case as to why the government has to move to introduce a grocery adjudicator and a system that allows third parties to submit evidence.”

David Simmons from Riviera Produce, which markets around 40% of the cauliflower and spring greens grown in Cornwall, acknowledged market conditions were getting tougher. “We’re faced with rising costs, yet customers are unwilling to pay any rise in prices.”

Conditions in the cauliflower sector had been made even tougher by the relatively mild autumn, which had boosted crop growth and meant many crops were around three weeks further forward than normal and ahead of the main period of demand. “It’s the complete opposite of last year when we were just heading into a really cold spell that stopped crops growing,” he noted.

The impact of retailer discounting appears to be being felt in the milk sector too.

Milk processor Robert Wiseman Dairies, which provides almost a third of the fresh milk consumed in Britain every day, said profits had fallen more than 40% in the past six months due to a “challenging environment for customers and consumers”. Dairy Crest also reported a slump in profits from its dairies division following “an extremely challenging period”

Milk processor Robert Wiseman Dairies, which provides almost a third of the fresh milk consumed in Britain every day, said profits had fallen more than 40% in the past six months due to a “challenging environment for customers and consumers”. Dairy Crest also reported a slump in profits from its dairies division following “an extremely challenging period”.

Illustrating the increasing price consciousness of consumers, the latest Institute of Grocery Distribution’s ShopperTrack research, based on interviews with 1,000 shoppers, showed 84% used price as a factor when deciding which grocery store to shop at, the highest level for a year.

IGD’s chief economist James Walton said shoppers were also shopping around more as the average number of store types (eg hypermarkets, discounters, online) used in the last month was 3.3, up from 3.1 in the same month in 2010.

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