According to recent data, food prices are now the primary driver of inflation, with a growth rate of 9.7%. This figure is more than double the overall retail growth rate of 3.9%, making it the slowest in the last six months. With these developments, many industry analysts are carefully monitoring the situation, and some have even offered their insights into the matter.
Mark Lynch, a partner at Oghma Partners, a corporate finance house specializing in consumer industries, stated that “Food price inflation is being driven not only by current shortages of fruit and veg related to supply chain issues but also by the lag effect of food manufacturers catching up with previous cost pressures from last year.”
He further added that the recent price increases were necessary to re-coup the margins lost over the last twelve months. While some costs such as energy have come down, raw material costs need to decrease across the board to fully flush out inflationary pressures from the system.
Brexit has negatively impacted the UK’s supply constraints, leading to a limited support system for various agri-sectors and increased energy costs. These supply-side constraints are visible in pork prices, egg availability, and overall costs of UK fresh produce supply and pricing.
Therefore, while we may expect some cyclical decline in food pricing to occur in H2 2023, the UK may be uniquely positioned to struggle with inflation from domestically produced products. The impact of Brexit and supply side issues will have a lengthy hangover effect.
In light of these developments, it is critical for businesses to stay informed, prepare for rising costs, and adjust their strategies accordingly. As the market evolves, proactive measures can help mitigate risks and pave the way for future success.