Scale of price hikes becoming clear and things only getting worse

What looked like being a simple has-beans fight has widened in recent days with Mars joining Heinz in a row over pricing with Tesco which has seen a growing number of well-known products including baked beans, ketchup and dog treats disappearing from the retailing giant’s shelves across the Irish Sea.

Tesco has made headlines after saying it will not accept the price increases the producers are looking for and threatening to delist them unless better deals can be struck. The producers, meanwhile, have pointed to the impact on them of higher costs.

While Ireland has yet to be caught up in the row, the dispute has lifted the curtain on the behind-the-scenes wrangling that retail expert and TU Dublin academic Damian O’Reilly is increasingly commonplace across the grocery supply chain here as it is there.

“The retail sector is finding it very difficult at the moment because the spike in the price of almost everything means they are having to reduce their margins in order to lessen the impact of price spikes on consumers,” he says.

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Pointing to the dispute in the UK, he suggests “there is an awful lot of that going on between the big supermarkets and the big producers like Heinz and Unilever and Procter & Gamble [and] there are some negotiations that will be very tense. The question really boils down to is who is going to shoulder the cost of rising commodity prices and input costs?”

The answer, he says, is depressingly predictable. “Ultimately it will be the consumer.”

In many instances the consumer is already paying, according to Emer Healy of retail analysts Kantar Worldpanel.

Grocery inflation, she says, now stands at 6.5 per cent, the highest since February 2013, with “some of the sharpest increases coming in essentials like butter, eggs, bread and flour” that form the staples of most weekly shopping lists.

These four, taken together, have jumped by €1.30 in recent weeks: “Butter is up 25 per cent, eggs are up 20 per cent and a weekly price hike of that size on just four items is huge,” Healy says, warning that inflation will add €453 to the average shopper’s bill this year.

The bad news is that the worst may be yet to come.

According to O’Reilly, many of the things which have been driving up prices on global commodity markets “haven’t found a way through to the food supply chain yet but they are going to come through and a lot of the higher input costs are coming down the tracks”.

“I won’t say food price inflation is going to get worse but I can certainly see it staying at current levels for the coming months. We might see an improvement at the beginning of next year but that is far from certain,” he says.

Some shops could gain, though: “I am hearing a lot of anecdotal evidence suggesting that they have seen an uplift in small businesses in recent months. That has been driven by people not wanting to spend extra money on fuel. There is also the fact that in those shops people tend to only buy what they need so there is less food waste and I think people are growing more conscious of [that].”

Customers are increasingly talking about their own experience of rising costs. One reader, Ruth O’Mahony, noted that Aldi’s instant noodles once cost 14 cent, before they disappeared off the shelves. They recently reappeared, but they now cost 39 cent.

“Ireland is seeing unprecedented cost pressure across the economy due to a number of global factors,” an Aldi spokesman told The Irish Times, adding that while the retailer would “always shield our customers from price increases as much as possible” sometimes it is just not possible.

Aldi’s own-brand instant noodles disappeared temporarily “due to a number of global supply chain issues” and “due to a significant global increase in the cost of its primary ingredient wheat and a rise in the cost of shipping the product from China”.

The noodles did indeed return with a price of 39 cent. While that is significantly higher than before, Aldi pointed out that this is still 70 per cent cheaper than branded noodles.

The Aldi statement points to at least a partial solution for consumers: the move away from brands.

A recent Kantar survey makes it clear that inflation fears are beginning to hit home with customers opting for cheaper goods. Two-thirds surveyed now say they would swap a branded item for a private-label product if it was cheaper.

O’Reilly says there will be “even more emphasis on private-label products” in the months ahead while sales of frozen food — which is typically cheaper — will do well. “People are also starting to cut back on non-essential items and changing the product mix in their basket in order to spend less money,” he suggests.

In recent weeks The Irish Times has charted shifts in the price of 25 commonly bought products. Since we began at the end of June, the cost of a small number of the products has fallen, but far more have risen. So far, there has been a net increase in the cost of the basket of €1.98 in just over four weeks.

But that is not the full story, since the price of that same basket rose by €3.05 between April and May, which brings the rise so far this year to €5.03. Spread out over the course of a full year, and the higher cost of those items — just a small percentage of the typical weekly shop will climb by more than €260.

We will check on these items next month to get a sense of how they are moving and what impact that will have on our pockets. If you notice any big price increases, let us know at pricewatch@irishtimes.com.

Brennan’s sliced pan white, 800g: €1.87 (no change)

Avonmore milk, two litres: €2.19 (up 20 cent)

Denny Gold Medal sausages, 454g: €3.40-€2.75 (up 68 cent)

Cadbury Dairy Milk, 110g: €1.49 (down 25 cent)

Knorr Vegetable Stock Pot, 224g: €2.92-€3.89 (average €3.40, down four cent)

Heinz beans four pack: €3.99 (up 19 cent)

Birds Eye fish fingers 10 pack: 280g €4 (up 18 cent)

Strawberries, 250g: €2.99 (up 25 cent)

Nescafé coffee 200g: €6.50 (no change)

Eggs — six free-range: €1.59 (down 10 cent)

Barry’s Gold Blend tea, 80 tea bags: €3.60 (no change)

Chicken breasts, 1kg: €10.64-€13.21 (average €11.92, up 54 cent)

Sirloin steak, 1kg: €10.73-€13.61 (average €12.17, no change)

Carrots, 1kg: €0.99 (no change)

Rooster potatoes, 1kg: 80-84 cent (up 27 cent)

Onions, 1kg: €0.49-€0.59 (no change)

Flora sunflower oil, two litres: €7.99 (no change)

Green Isle frozen peas, 450g: €1.60-€1.78 (up three cent)

Kerrygold butter, 454g: €3.95 (no change)

Kellogg’s cornflakes, 1kg: €4-€4.39 (average €4.20, down 10 cent)

Barilla spaghetti, 1kg: €4.69 (no change)

Own-brand milk, two litres: €1.89-€2.09 (average €2.02, up 13 cent)

Own-brand butter: €2.99