According to the Office for National Statistics (ONS), overall spending has increased significantly since before the pandemic. However, this upward trend is primarily due to inflation, as sales volumes remain slightly lower than pre-pandemic levels.
Samantha Phillips, a partner at analysts Mckinsey, highlights the significant impact of inflation on food, with volumes falling by 0.5% in May. She attributes this decline to various factors, including different buying patterns outside of food retailing during bank holidays and consistently high prices of food items such as sugar (49.8%), milk, cheese, and eggs (27.4%), and oils and fats (22.6%), as well as flour and other cereals (23.6%).
Silvia Rindone, the retail lead for the UK at accountants EY, notes that food manufacturers have reported a drop in production costs for the first time since 2016. Lower energy and shipping costs have outweighed the impact of increased wage bills. However, Rindone points out that it may take some time before consumers experience the benefits of these cost reductions, as food price inflation reached its highest level since 1977 in April.
The issue of affordability remains a primary concern for consumers. EY’s latest UK Future Consumer Index report reveals that 43% of consumers consider affordability a key factor in their purchase decisions. Additionally, consumers show a growing preference for private label products, with 80% willing to buy private label packaged food.
In conclusion, while overall spending has increased due to inflation, sales volumes in the food industry remain slightly below pre-pandemic levels. The impact of inflation can be seen in the decline in food volumes and consistently high prices of certain food items. Although food manufacturers have reported reduced production costs, it may take some time before consumers witness a significant decrease in food prices. Affordability remains a key concern for consumers, resulting in a growing willingness to purchase private label products.
