Food price rises moderate in August, but still outpacing inflation: UBS

Australian supermarket food prices increased by 7.2 per cent over the past 12 months, outpacing the annual rate of inflation as households continue to face cost-of-living pressures.

Australian supermarket food prices increased by 7.2 per cent over the past 12 months, outpacing the annual rate of inflation as households continue to face cost-of-living pressures.

Analysis from investment bank UBS showed that food prices have increased by more than the 4.9 per cent rate at which inflation rose in the 12 months to July.

While food prices were outstripping broader inflation trends, UBS said prices had moderated for the fourth consecutive month, down on 7.6 per cent in July and 8.8 per cent in June. The recent peak for food inflation was 9.6 per cent in the 12 months to April.

UBS Australia’s Evidence Lab sources the data by tracking more than 60,000 food prices online across Woolworths and Coles.

Price inflation at Coles outpaced that of Woolworths at 8.5 per cent in August versus 9 per cent in the prior month. Prices at Woolworths edged down from 6.4 per cent in July to 6.3 per cent.

Fresh produce recorded marginally higher growth at 7.5 per cent compared to 7.1 per cent for dry goods. Both were down on the previous month.

“Dry grocery inflation is moderating, assisted by cycling tougher comps, yet remains elevated with this expected to continue due to ongoing commodity and domestic supply chain pressures including labour,” UBS analyst Shane Cousins said.

Woolworths CEO Brad Banducci. Picture: Adam Yip

The Australian Bureau of Statistics reported that food and non-alcoholic beverages rose 5.6 per cent in July compared to 7 per cent in June. Data for August will be out on Wednesday.

Households have been forced to be more choosy amid the barrage of price rises at supermarkets with Coles boss Leah Weckert noticing that the emergence of the “savvy shopper” who heavily researched prices, used online catalogues, loyalty points, frozen meals and bulk buys to eke out savings from their grocery budgets.

She said younger families and people aged under 34 were under particular pressure and were much more focused on loyalty programs, doing infrequent shopping to create meal plans and sticking tightly to a budget as they counted the dollars and cents.

Shoppers were also changing the products that they buy to those that are either priced lower such as private labels or that have seen lower rates of inflation, according to UBS.

Woolworths and Coles control 70 per cent of the grocery market in Australia with the remaining 30 per cent held by Aldi, IGA and other independent chains.

Woolworths chief executive Brad Banducci last month said the supermarket giant was not “gouging customers on price” after underlying profit rose 4.6 per cent in the 2023 financial year. He said that Woolworths would focus on lowering prices in 2024 to help ease the burden of its shoppers.

“The most important thing we need to do is provide value for our customers,” he said.

Originally published as Food price rises moderate in August, but still outpacing inflation: UBS