Food industry says price rises reflect cost hike

The food industry has defended itself against claims that grocery prices have risen despite the abolition of the law that controlled the price of certain common food products.

The Government claimed the abolition of the Groceries Order in March would ultimately result in cheaper food products, but recent consumer surveys suggest the prices of a number of everyday items have actually risen.

Food and Drink Industry Ireland (FDII), the Ibec group representing the sector, said a detailed examination of prices in the grocery sector was needed to inform the debate.

According to the body, the gross output of the Irish food and drink industry is some €17 billion, accounting for over a fifth of manufacturing output and 9 per cent of GDP.

FDII director Paul Kelly said food inflation reflects rising business costs, and not whether or not the Groceries Order had been abolished.

"An examination of price formation would not alone confirm this, but also ensure the Government had the information to make informed policy decisions," Mr Kelly said.

"In abolishing the Groceries Order the Government had been swayed by those who predicted a fall in prices. They ignored the harsh reality of rising business costs, which industry has always said must ultimately be reflected in prices."

Mr Kelly said the "competitive nature of the marketplace" meant food prices had risen by only 3.7 per cent since December 2001, compared with an overall rise of 16 per cent in the Consumer Price Index (CPI).

"Indeed, from the middle of 2003 to early 2006 food inflation was zero or negative - prices were actually falling," he said.

"Ongoing increases in business costs, such as rapidly rising energy costs, will inevitably feed through into consumer prices at some stage. To combat inflation the focus must be on controlling business costs, rather than debating ad nauseam the Groceries Order."

Mr Kelly claimed the food and drink sector was under "severe competitive pressure" in both the domestic and export markets.

"The Government must level the playing pitch by developing a policy on competitive energy pricing, undertaking a comprehensive end-to-end development strategy for the food industry and ensuring conditions of fair trade in the marketplace."

A survey by the Consumers' Association of Ireland, a non-government body, suggested this week that the prices of 36 everyday items in stores including Tesco, Superquinn, Dunnes, Aldi, Lidl, Spar and Centra, had risen since the abolition of the Groceries Order.

However, not all of the items in the survey for the CAI's Consumer Choicemagazine were covered by the order.

The Competition Authority claimed that scrapping the order would save the average household about €520 a year.

Director of Consumer Affairs Ann Fitzgerald, also claimed last week that most supermarkets and convenience chains do not seem to be competing on price, as was predicted would happen after the abolition of the order.

Labour Party spokeswoman on consumer affairs Kathleen Lynch said the logic behind the "dumping" of the Groceries Order was that it would help lower the cost of everyday items by allowing below-cost selling.

"However, the reality is that the reverse has happened, with the Consumer Association reporting that the price of some basic goods has risen by a third over the last six months," she said.

"Hardworking families in Ireland should not have to suffer the empty feeling of being ripped-off every time they head to their local shop or supermarket for such everyday items as baked beans, eggs, or shampoo. The Labour Party is committed to tackling these prices and to ensure that families are not exploited for these basic goods."