Rising grocery prices to hit households

There are fears that Aussies could be lobbed with extra living costs as experts predict that grocery prices are about to rise.

There are fears that Aussies could be lobbed with extra living costs as experts predict that grocery prices are about to rise.

Supermarket giants as well as independent grocery stories could be left with no choice but to increase prices to stay on top of costs, according to Brian Walker, CEO from the Retail Doctor Group.

“Margins (at grocery stores) are quite thin and they’re all about volume. When you get price pressures and prices rises, supermarkets try to get their suppliers to wear as much of that as they can. Sometimes they have to pass that onto consumers,” Mr Walker told news.com.au.

“We’re starting to see a creep now.

“There’s some evidence of ‘shrinkflation’ (which means) if I buy a kilo of rice for $5, a year later I buy 750g for $5, quantities are reducing.”

Prices could start to rise by Christmas, particularly for vegetables, fruit and beef.

The retail expert said the changes were the result of Covid-19 which had caused a “cosmic shift” in grocery production around the world.

Long-term consequences of the pandemic, such as shuttered international and interstate borders, labour shortages in the farming and freight sector and increased fuel costs, are contributing to the price hike.

‘Shrinkflation’ is becoming more common. Picture: NCA NewsWire / David Mariuz

Mr Walker said Australia had experienced a 3.8 per cent rise on the Consumer Price Index (CPI) in a year — which was the highest increase since 2008 when the world was in the throes of the Global Financial Crisis.

In the last quarter, there was a 0.8 per cent rise.

The CPI looks at the consumer goods and services purchased by households, however it is worth noting it doesn’t solely include groceries.

ABS data shows households are paying about three per cent more for fruit and vegetables over the last 18 months.

In contrast, wages have only grown by 1.5 per cent in the past year.

“Any price rise can worry people,” Mr Walker said.

“It will rise the cost of living, will put pressure on households.”

Coles, Woolworths, Aldi and the IGA are Australia’s four biggest grocery retailers. The competition has largely kept prices down. Picture: NCA NewsWire / Gaye Gerard

Last month, Coles boss Steven Cain indicated a possible price increase while he delivered the company’s 2020-2021 financial year results.

“We are beginning to see an increased number of suppliers approaching us for cost price increases in the grocery space,” Mr Cain said.

“(That) is very aligned to increased shipping costs, or to raw ingredients.”

Woolworths also foreshadowed higher costs sometime later down the track.

“We are starting to see more cost increases come forward and we’ll work through those on an individual case basis,” Woolworths boss Brad Banducci said last month.

However, good news is on the horizon.

“As we reopen, as supply increases to meet demand, prices should normalise,” Mr Walker explained.

“From a retail point of view, they (grocery stores) have to satisfy customers and they have to remain profitable. It’s going to level out eventually.”

Gocery store CEOs have indicated that it is becoming harder to keep prices the same as they currently are. Picture: NCA NewsWire / Nikki Short

Groceries aren’t the only commodity affected by closed international borders and supply chain issues.

Aussies are being warned not to leave their Christmas shopping until the last minute as retailers continue to grapple with slow deliveries.

Retailers have reported the capping of incoming flights putting significant strain on shipping.

At the same time, container costs had escalated up to four times their usual rate, a factor likely to have a flow-on impact on retail prices.