Food prices will continue biting Kiwi households this year

Food prices are likely to keep biting Kiwi households, with prices up 12.5 per cent on last year.

Stats NZ announced today that annual food prices increased 12.5 per cent for the year to April
2023 with groceries driving most of the price growth.

ASB senior economist Mark Smith said the price increase was in line with expectations but still taking a significant bite out of Kiwis’ spending power.

“Food prices are on track to make a sizeable positive contribution to the second quarter consumer price index inflation, in the region of 0.5 basis points,” Smith said.

Stats NZ said fruit and vegetable prices were the second-largest drivers of price increases in the last 12 months, up 22.5 per cent on last year.

Fruit and vegetable prices fell 2.9 per cent between March and April this year, however, which Smith said is “a touch weaker than expected”.

LeaderBrand chief executive Richard Burke said fruit and vegetable prices fell in recent weeks due to a recovery from weather events, warmer temperatures and increased supply across the market.

Burke said a large volume of broccoli meant consumers would start to reap the benefits of lower prices.

“In the coming weeks, we really hope that Kiwis will take advantage of the lower prices such as broccoli, iceberg lettuce, spinach and plenty of other vegetables across the fresh aisles.”

Meat, poultry, and fish prices were up 1.1 per cent between March and April while grocery food prices rose 1 per cent in that period, up 1.1 per cent after seasonal adjustment.

Non-alcoholic beverage prices fell 1 per cent in the last month. Smith said higher prices for coffee were partly offset by lower prices for soft drinks.

Smith said, “It is our hope that annual food price inflation has peaked given lower global food commodity prices. However, the risk is that the current upward momentum in food prices takes longer to slow.”

Last month, communications and marketing agency Anthem published findings from a research survey of over 1000 Kiwis into fair pricing. Anthem found most Kiwis are less supportive of big businesses passing on costs than they are of smaller ones.

Anthem found 81 per cent of respondents felt supermarkets charged excessive prices with 40 per cent agreeing it was unfair for big businesses (with over 100 staff members) to pass on cost increases to customers.

Consumer NZ head of research and advocacy Gemma Rasmussen said companies making big profits “can be a hard pill to swallow” at a time when consumers are facing unprecedented financial pressures.

“It can be hard for people to hear about massive profits for banks and supermarkets, particularly when these are services where you don’t have other options. Everyone needs to bank, everyone needs to go to a supermarket,” Rasmussen said.

“We need to have faith that the market is working in a way that is competitive and fair so customers can have confidence they’re getting a fair deal.”

Business NZ chief executive Kirk Hope said it was important for businesses to remain profitable and continue to grow.

“If businesses are having to absorb cost rises at a much faster pace than previously experienced, they need to make sure they’re communicating strongly with their customers so people understand what’s going on instead of just seeing increased prices,” Hope said.

“Supermarkets have been under a lot of pressure.”

Chris Quin, managing director of Foodstuffs NZ – which owns the New World and Pak’nSave brands – said, “The inflation fight is proving to be long and difficult, with a range of underlying drivers keeping the pressure firmly on the cost of growing, manufacturing and retailing food in New Zealand.”

In response to today’s food price data, Quin said, “We’re doing everything we can to fight inflation – buying well to get products at a fair price for customers and running our stores and supply chain as efficiently as possible to keep our costs down. But there are a number of factors making the battle tougher, with some of the major drivers making it more expensive to get food on shelf out of our hands.”

Quin said inflationary pressures such as transport, wages, and one-off weather events are “weighing heavily” on the business.

”Across our logistics network we’re still experiencing a raft of operational price increases, amplified by ongoing inter-island service disruptions, increased sick leave due to Covid-19 and significant labour pressures facing the transport industry.”

He said ongoing road and infrastructure damage due to floods and cyclones is making it more difficult to get supplies to stores across the North Island.

”Weather remains the wild card in terms of domestic inflation this year. The weather in Auckland earlier this week is evidence of this and we’re still seeing some of the flow-on effects of Cyclone Gabrielle.”

Anthem chief executive Jane Sweeney said, “Companies and organisations are really challenged reputationally at a time like this.

“When you’ve got a cost of living crisis, people are really looking at organisations to be fair. They really need to find the right balance between being a commercially viable business and making goods and services less attainable for those people who are struggling.”

Anthem’s research results are based on a survey of 1106 nationally representative respondents in Aotearoa conducted by Talbot-Mills Research.