Foodstuffs Reports Food Price Deflation Following Bumper Growing Season

Foodstuffs reports food price deflation following bumper growing season

• Stats NZ’s food price measure declines -0.3% in the 12 months to June 2024
• Foodstuffs co-ops record -0.5% decrease in retail prices in same categories as Stats NZ basket
• Produce prices lead decrease, by -14.6% on average, including 10 items down by over a third
• Overall Foodstuffs’ supplier costs rise 2.4% in year to June

The Foodstuffs grocery co-ops have recorded another month of food price deflation at their stores and the lowest rate of supplier cost increases since they started tracking them two years ago.

The two co-ops, whose member-families own the country’s 500+ PAK’nSAVE, New World and Four Square stores, have been comparing the average rate of price increases across their stores for foods in the same categories as Stats NZ’s food inflation ‘basket’, since mid-2022.

In the latest month, June 2024, the Foodstuffs co-ops recorded a year-on-year price decrease of -0.5%, while Stats NZ’s nationwide rate was -0.3%. It’s the first time both have recorded a deflationary rate, and the fourth consecutive month both rates have been below RBNZ’s inflation target of 1–3%.

At the same time, the co-ops saw an average 2.4% rise in what suppliers charged in the same food categories – the lowest since they started tracking them – while Infometrics recorded a 2.7% rate for all products in its Grocery Supplier Cost Index, which covers a wider set of 60,000 products the co-ops sell.

Foodstuffs NZ Managing Director Chris Quin says the Foodstuffs co-ops’ concerted efforts to fight inflation over the past two years have been helped by their supplier partners.

“When you consider that just 12 months ago, the official rate of food price inflation was still in double digits, it shows how far we’ve come,” says Quin. “Factors behind that success include many produce growers’ hard work to recover from last year’s cyclones, and our store owners’ and other suppliers’ focus on keeping prices down for our customers.”

“There’s a lot of narrative around supermarkets’ relationship with suppliers lately in the context of the proposed merger of Foodstuffs North Island and Foodstuffs South Island.”

“Our clear message to supplier partners is always that we know our success is intertwined with theirs, and if we get clearance to merge, suppliers will still have multiple opportunities for their businesses to grow with us – whether that’s selling in one local store, several stores, or nationwide – and the ability to engage efficiently with a national retailer who can deliver all those options, access all markets and potentially sell even more goods.”

“We’ll also continue to live by our values and the new Grocery Supply Code, whether we’re two co-ops or one. And our commitment to supporting the growth of small and emerging suppliers remains.”

“What must be remembered is that as grocers it’s our role to keep seeking the best costs for customers, whether from local or offshore suppliers, so we can keep delivering value at the checkout. It’s a balancing act but it’s what we’ve been doing for a century, and what we’ve been particularly focused on over the past two years, in the face of the highest inflation in a generation.”

Produce prices lead decrease

New Zealand now has one of the lowest rates of food inflation in the OECD. Offshore rates recorded in May (the most recent month data is available) include 3.3% in Australia and 2.6% in the Euro area.

Helping to keep New Zealand’s latest rate down was an average 14.6% decrease in retail prices for fruit and vegetables in Stats NZ’s basket, including 10 products that fell by over a third, as shown below.

Foodstuffs’ produce experts say growers and consumers have benefitted from continued mild weather around the country. Standouts include the recovery of the pumpkin crop after the shortages caused by Cyclone Gabrielle, and bargain prices for broccoli, New Zealand’s favourite vegetable.

Quin says the Foodstuffs co-ops have been working with 5+ A Day and Vegetables NZ to encourage New Zealanders to add one more vegetable to their weekly shop, to support local growers.

“It’s basic economics that bumper supply means more competition and therefore lower prices. Consumers save at the checkout, and it’s great for their health too. By adding a little more produce to their trolleys – perhaps instead of less healthy options – our local growers benefit too.”

Singapore shipping constraints pose future risk

Foodstuffs’ logistics experts say Singapore, the world's second-largest container port, is now seeing its worst delays since the COVID-19 pandemic, as vessels reroute to avoid the Red Sea.

Longer wait times for unloading are affecting neighbouring ports too, contributing to a shortage of shipping slots and containers, causing elevated prices and delays affecting businesses worldwide.

Quin says the potential for upward cost pressures due to geopolitical events is a longstanding risk for New Zealand, but one the Foodstuffs co-ops are always working hard to mitigate.

“It’s worth remembering that for every dollar of the shelf-price, around two-thirds is what we pay suppliers for their goods. If those goods are imports, higher shipping costs will eventually kick in, or if there’s a shortage of something there may be more competition among global retailers.”

“Our buyers and logistics experts are always on the lookout for better deals, and planning months ahead, and our co-ops’ top priority will always be on delivering value at the checkout for customers.”

Notes:

Methodology

Stats NZ measures food price inflation by tracking the prices of individual items that make up a representative food basket. Foodstuffs measures the prices of products in the same categories as that basket, applying the same weighting and methodology to calculate a year-on-year rate for both retail prices and supplier costs, comparing the latest month with the same month one year earlier.

Headline stats for June 2024 (all figures year-on-year)

• Stats NZ’s food price index was down -0.3% in the 12 months to May (vs. 0.2%pa in May)
• Foodstuffs data on products in the same categories as Stats NZ’s basket show that, on average:
• retail prices across its stores were -0.5% lower than in June 2023
• the cost of supplied goods was 2.4% higher than in June 2023
• The latest Infometrics-Foodstuffs NZ Grocery Supplier Cost Index (GSCI) showed the ‘list price’ cost suppliers charged the Foodstuffs co-ops across 60,000 goods rose 2.7%pa in June (vs 2.9% in May)

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