UK food prices finally falling, as Greggs says cost inflation is easing – business live
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Food prices in the UK are finally falling, new data this morning shows, thanks to a supermarket price war and easing inflationary pressures.
The British Retail Consortium reports that UK food prices fell by 0.1% during September. That’s the first monthly drop in the cost of food in the shops in over two years.
It brought the annual rate of food price inflation down to 9.9% in September, down from 11.5% in August, and the lowest since August 2022.
Helen Dickinson, OBE, chief executive of the British Retail Consortium, said ”fierce competition between retailers” pulled year-on-year food inflation down to single digits.
Customers who bought dairy, margarine, fish and vegetables – all typically own-brand lines – will have found lower prices compared to last month. Households also benefitted from price cuts for school uniforms and other back-to-school essentials.
Several UK supermarkets have announced rafts of price cuts in recent months, with Tesco squeezing suppliers so it can pass savings on.
Photograph: BRC
More widely, the BRC says prices in British store chains rose at the slowest pace in a year in September, with annual shop price inflation cooling to 6.2% last month from 6.9% in August, its lowest since September 2022.
Annual non-food inflation dropped to 4.4% in September, its lowest since December 2022, and down from August’s 4.7%.
Dickinson predicts shop price inflation to continue to fall over the rest of the year, however there are still many risks to this trend.
They include high interest rates, climbing oil prices, global shortages of sugar, and supply chain disruption from the war in Ukraine.
Food prices have been a key factor pushing up the official UK inflation rate in the last 18 months or so, so the BRC’s figures could indicate the cost of living squeeze is easing.
That will cheer the government, with reports last weekend that Rishi Sunak might call a general election once CPI inflation has dropped below 3%. It was 6.7% in August, having peaked around 11% last year.
The bakery’s offering of drinks and snacks with speedy service have been enjoying strong sales from workers and other people on the go. Despite the cost-of-living crisis with consumers forced to make cutbacks, demand at Greggs remains robust thanks to its competitive pricing and appealing range of hot and cold items like sandwiches, sausage rolls, coffees, and sweet treats.
Even faced with pressures from inflation, Greggs is still expanding with between 135 and 145 net shop openings this year and it is also investing in its supply chain.
Shares in Greggs are up over 40% over the past year. But they have been giving back some gains since the May highs. Nonetheless the analysts remain bullish on the stock with 8 buy recommendations versus 3 holds and zero sells.”
Charlie Huggins, manager of the Quality Shares Portfolio at WealthClub, says Greggs’ performance so far this year is impressive, and it should return to profit growth in 2024 as cost pressures ease:
“This is another solid performance from Greggs in a challenging economic environment, with little sign so far of consumers cutting back on sausage rolls and pasties.
Greggs has continued to gain market share in a difficult environment which is mightily impressive. There is no doubt Greggs’ brand is resonating strongly with the UK consumer and is in fine fettle.
The cost of raw materials, energy and wages have risen rapidly over the last year, but encouragingly these cost pressures are now beginning to ease. This isn’t just good news for profit margins but should also help underpin consumer demand by reducing the need for price increases.
Matt Britzman, equity analyst at Hargreaves Lansdown says the baker chain “continues to delight”.
Greggs is starting to build quite the reputation for delivering strong results, and today’s update certainly hasn’t bucked that trend. Once heralded for its sausage rolls, Greggs has worked hard to expand the menu whilst retaining its core value offering. All the while, the expanding delivery service (like the new partnership with Uber Eats), click & collect options, and later opening times make it easier than ever to get your bakery fix.
Inflated costs are starting to ease, which gives more wiggle room on pricing over the second half. Don’t be surprised to see a slight cooling effect on like-for-like sales from here, as it laps periods last year when prices moved higher. It’s a win in the long run though, less pressure on costs makes it easier to keep prices in check and retain that coveted value offering.
Bears will argue the valuation doesn’t leave a whole lot of room for error, and they’d be right. But with great food comes with even greater expectations and Gregg’s broadening shoulders look strong enough to carry that weight.”
Greggs customers will be keen to know that its autumn menu is now available.
It includes a hot spicy chicken and veg bhaji baguette, while new vegetarian options include a cheese and honey mustard toastie, veg bhaji flatbread and mozzarella and cheddar bites.
on the drinks side, there’s a new hazelnut mocha and hazelnut hot chocolate, while the pumpkin spice latte is back on the menu too.
Greggs lates quarterly results also shows that it continued to expand across the UK.
It opened 144 new stores so far this year, and closed 62, leading to a net increase of 82 stores.
It expects between 135 and 145 net shop openings in 2023 and around 40 relocations.
The Greggs bakery shop at Lymm M6 motorway services in Cheshire, England Photograph: Justin Kase zninez/Alamy
British baker and fast food chain Greggs has confirmed that cost pressures are easing.
In its latest quarterly results, just released to the City, Greggs says there has been “some easing in cost inflation” in the last three months.
The company explains that it is now around a year since the “significant commodity-led increases” of 2022 for energy and food ingredients, which means annual inflation rates are now slowing.
It adds:
At a time when customers are looking to make their money go further Greggs continues to offer exceptional value and grow market share.
We have strong product and promotional plans for the fourth quarter and the extension of our delivery service will make Greggs accessible to more customers on more occasions.
Greggs reported that like-for-like sales in company-managed shops have risen by 14.2% in the 13 weeks to 30 September.
It is sticking with its guidance for the financial year, despite “the uncertainty in the economy as a whole”.
Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
Food prices in the UK are finally falling, new data this morning shows, thanks to a supermarket price war and easing inflationary pressures.
The British Retail Consortium reports that UK food prices fell by 0.1% during September. That’s the first monthly drop in the cost of food in the shops in over two years.
It brought the annual rate of food price inflation down to 9.9% in September, down from 11.5% in August, and the lowest since August 2022.
Helen Dickinson, OBE, chief executive of the British Retail Consortium, said ”fierce competition between retailers” pulled year-on-year food inflation down to single digits.
Customers who bought dairy, margarine, fish and vegetables – all typically own-brand lines – will have found lower prices compared to last month. Households also benefitted from price cuts for school uniforms and other back-to-school essentials.
Several UK supermarkets have announced rafts of price cuts in recent months, with Tesco squeezing suppliers so it can pass savings on.
Photograph: BRC
More widely, the BRC says prices in British store chains rose at the slowest pace in a year in September, with annual shop price inflation cooling to 6.2% last month from 6.9% in August, its lowest since September 2022.
Annual non-food inflation dropped to 4.4% in September, its lowest since December 2022, and down from August’s 4.7%.
Dickinson predicts shop price inflation to continue to fall over the rest of the year, however there are still many risks to this trend.
They include high interest rates, climbing oil prices, global shortages of sugar, and supply chain disruption from the war in Ukraine.
Food prices have been a key factor pushing up the official UK inflation rate in the last 18 months or so, so the BRC’s figures could indicate the cost of living squeeze is easing.
That will cheer the government, with reports last weekend that Rishi Sunak might call a general election once CPI inflation has dropped below 3%. It was 6.7% in August, having peaked around 11% last year.
