Small change at the checkout

What's the story with higher grocery prices?

Speaking to the annual gathering of the nation's shopkeepers in Croke Park last week, the Taoiseach, Bertie Ahern, said that as a result of the Groceries Order's abolition last year they were now completely free to set their own prices untroubled by restrictive legislation. He expressed the hope that this would bring about "increased price competition within the independent sector as well as between the independent sector and multiples".

Consumers might be forgiven for asking exactly what planet Mr Ahern is living on if he genuinely believes prices are heading south. Since the beginning of the year, the cost of gas has gone up by 23 per cent and electricity prices have risen by more than 10 per cent. Bus and rail fares, bin charges, toll charges, VHI payments and stamps have also gone up.

The price increases have pushed the rate of inflation to just over five per cent and pushed people close to breaking point, according to opposition politicians and consumer advocates alike. The cost of food and drink looks set to follow suit, with warnings of price rises coming thick and fast in recent weeks. Bread, breakfast cereals, juices and canned foods will all cost us more - as much as 20 per cent more - come the summer, according to Food and Drink Industry Ireland (FDII), the representative body for the Irish food and drink industry.

PRE-EMPTING WHAT HEsaid would be a media "frenzy" focusing on "consumer rip-offs, which are clearly untrue", the FDII director Paul Kelly said the food industry was in "crisis". He claimed that it was "important for everyone to recognise the reality of doing business in Ireland" and added that it was "unrealistic for businesses to absorb numerous input cost increases without increasing prices". The FDII pointed towards 12 factors which, it said, accounted for rising food prices. It said the cost of wheat had climbed by 25 per cent since last summer while fruit and fish had gone up by more than a third. Rapeseed and glucose had risen by similar amounts and, when packaging materials, energy costs, recycling fees, distributions costs and wages were taken into account, there was nothing left for retailers but widespread price hikes.

Dermot Jewell of the Consumers Association of Ireland isn't buying it. He is incensed by the reports of inevitable price hikes and believes they reflect the retail sector's greed and determination to keep their profit margins high, whatever the final cost to the consumer.

Given that many of the reasons given for impending price increases are global in their nature, Jewell figured it would be instructive to see what was happening in other EU countries. He put calls in to many of his counterparts around Europe last week to find out if increased costs on global markets had seen retailers in other countries making similarly gloomy announcements about price hikes. "Not one of them has heard the same thing," he says.

He points out that while the retail sector talks about increased energy costs and higher recycling charges, it is all too willing to completely overlook the fact that Irish people have to face all of these increases too and then are hit with higher prices for their groceries as well. "Does the food industry want consumers to lose every single cent of their disposable income to keep the profit margins of the retailers in place?" he asks.

He says the industry is taking a "foolish gamble" on the ongoing passivity of Irish shoppers. "The market is running out of steam and consumers can't take much more of this," he believes. Jewell is confident that for the first time in many years people will be prepared to "stand up and fight" against the proposed across-the-board price increases.

"Irish consumers have not shown their power in many years. Now they have to be seen to take action. The challenge is being put up to them. Why are food prices going up and not coming down? It is because of the industry-wide determination to keep profits up and to keep shareholders happy," he says.

"Choice is where the power lies. It is consumers who have the control because it is their money which is being spent. Collectively we have the option of withholding it or spending it in cheaper outlets. Instead of talking about individual power we should be talking about the power of Us."

WHILE THE FOODindustry, smaller shops and mainstream supermarkets prepare for price increases, Jewell believes that many people will move their business to discount supermarkets such as Lidl and Aldi. Although such outlets may remain comparatively unfamiliar to many and do lack some of the well-known product lines carried in other stores, they can offer real value. Jewell says it is essential that people show that they are prepared to take their weekly food budget elsewhere in search of better value.

Of course, to find that value, people will need to be informed and able to accurately compare prices. And this may well prove to be a problem. The RGDATA conference at which the Taoiseach spoke last week was told that when 800 people were asked the price of five staple items - bread, milk, tea, butter and cereals - no one got all the prices right. Perhaps what Jewell describes as the retailers' "foolish gamble" on the ongoing passivity of Irish consumers isn't quite so foolish after all.