Home truths

That our daily foods should be inexpensive to buy - if not downright cheap - is one of the fundamental understandings which conditions…

That our daily foods should be inexpensive to buy - if not downright cheap - is one of the fundamental understandings which conditions our daily lives. So a certain, distinct, frisson runs through our society when the idea of increased food prices is mooted.

And then, when sterling suddenly opens up a divide of 15 pence with the pound, the threat of whopping price hikes on our beloved brands forces us to look at just what we place in the trolley every week, and how much we are prepared to pay for it. "It is a very complicated and developing picture at this time," says William Fagan, Director of Consumer Affairs. "I would not like to see an inflationary mentality taking hold here at the present time as it really is a deadly cycle. But there is certainly a degree of tension in the market."

The threat of price increases is exacerbated by the fact that, in recent times, the fierce competitiveness between the major chains has worked to keep food prices low. Eamonn Quinn of Superquinn says, "The food industry is good at keeping prices down. There has been zero inflation in many parts of the market in recent years, even deflation of prices, and supermarkets are slow to pass on price increases. They simply don't like to put prices up."

William Fagan concurs with this. "Traditionally suppliers use this time of the year to negotiate new prices, and it is clear that some retailers are trying not to pass on increases from suppliers."

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But that there is tension when our currency parts from parity with our biggest trading partner is undeniable, and people in the food industry admit that the current price differential between the pound and sterling is going to have an unavoidable impact on what we pay for what we eat.

Mary Brophy, the editor of the grocery trade magazine, Checkout, reckons that "the price differential will have a huge impact, and you can't avoid it. If you think of most of the gaudily packaged brands which we see on our supermarket shelves, most of them are coming from outside the country".

Anne Dunphy, marketing director of SuperValu supermarkets, which account for 15 per cent of the retail market in the country, says that "as the supermarket business is so brand-orientated and consumers demand the big brand names, 25 per cent of the products on the shelves are imported from the UK".

Mary Brophy puts the figure much higher for the grocery trade as a whole. "While there are areas where we are strong and produce our own foods - especially with dairy products - the reality is that 80 to 90 per cent of the foods we buy are coming from outside".

And even those goods which we think of as Irish are often only Irish in part.

"Some supermarkets will tell you that the figure breaks down as 60 per cent from outside and 40 per cent from Ireland", says Mary Brophy, "but of that 40 per cent, they call it an Irish product if 40 per cent of its added value has been created in Ireland. Lyons tea would be a perfect example, it's not grown here, but its added value is created in Ireland".

John Field, who runs the Fields, in Skibbereen, West Cork, one of the most distinguished country supermarkets, concurs with the general feeling in the industry. "It will certainly be a problem if it continues, but one benefit is that it will make local products more competitive. We do, however, have to face the fact that there are a huge number of products coming in from the UK. If only England would join the EMU!"

Quentin Gargan, head of Wholefoods Wholesale, which supplies a large number of wholefood shops and other outlets throughout the country, says, "It's been a nightmare this past week, with prices increasing by 5 per cent to 6 per cent. But the longterm effect can also go the other way. Take almonds, for example. If we buy from the UK we pay more. But the next time the trader in the UK buys from America, where the almonds come from, then sterling is strong and it brings his price down. That benefit is passed on to us, and the price comes back down. On any given week, I would expect in our business to see 300 price increases and 250 price decreases".

While the pound has been steadily sliding against sterling for some time, it has given those in the business some time to prepare, John Field points out.

"Accountants have predicted the sterling increase for some time, so we have been prepared for this. We didn't see any changes when the punt was at 104 pence sterling, so there is an element of swings and roundabouts to this." Quentin Gargan agrees: "The price of commodities is fluctuating every week. What we are hoping to do to avoid the fluctuations of sterling is to arrange to buy our goods in euros, and even at the present time we are beginning to buy goods from Europe in currencies such as Dutch guilders."

This move towards Europe and away from our traditional strong trading links with the UK is echoed by Superquinn's Eamonn Quinn. "We are increasingly more dependent on Europe, and we are part of a European buying group, which in some ways operates almost like barter: we send lamb and beef to the French who send back wines and cheeses, the Italians send pasta. Really, the future is about maximising our involvement with Europe."

But if a sterling spillover is bound to affect some prices, people in the business seem to see this as an opportunity, not a difficulty, with one consistent message: Buy Irish.

As John Field points out: "Our own brand products are sourced in Ireland and they won't be affected. It has always been our policy to support Irish foods so at a time like this we will see the benefit of that. Also, with companies such as Golden Vale and Kerry Foods now getting premium prices for their products, we hope to see this benefit being passed on".

For Superquinn, Eamonn Quinn underlines the benefit of buying Irish: "We are the only company which identifies Irish goods on our shelves and 60 per cent of the money spent in Superquinn stores is spent on Irish goods. The situation with sterling makes English goods more expensive, and Irish goods more competitive."

Mary Brophy, meanwhile, reckons the advantage to local foods is here to stay, as foods from the UK remain expensive. "There is no way to escape it. I would estimate that we will see a 6 per cent to 15 per cent increase in prices, and that the differential is here to stay. Even though the grocery share of the food spend is decreasing - they are losing their share of stomach as we say - you can't get around the price increases when you shop."

Even better incentive, then, to choose to buy Irish foods and also, perhaps, to take a tip from John Field: buy local. "We are lucky here in being able to source so many local west Cork foods: chickens, sausages, vegetables, ducks, herbs, eggs, fish - and of course there will be no change with these. In fact, 20 years ago, 70 per cent of our cheese was coming in from outside the country. Today, 70 per cent of our cheese is not just Irish, but comes from west Cork: Gubbeen, Durrus, Coolea, Carrigaline, Carbery. So that has made a major difference to our customers."