Supermarkets paying 24% more for fresh produce as suppliers' costs keep rising

Sunday, 15 January 2023

Supermarkets are paying 24% more for fresh produce as suppliers face ongoing cost increases, data shows.

The Grocery Supplier Cost Index, which measures the cost of more than 60,000 grocery products supplied to the Foodstuffs co-operative, showed the cost of groceries from suppliers rose 10.6% in the year to December.

Supplier costs were higher across all departments, with produce prices jumping 24%, Infometrics principal economist Brad Olsen​ said.

“Weather-related and other factors contributed to lower supply and higher costs across a number of items.”

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Butchery, seafood, and frozen foods supplier costs remained more than 10% higher than a year ago, while costs also increased for chilled foods and grocery items.

Because many companies observe a “summer cost change moratorium” to limit system changes over the holiday period, the number of items increasing in cost last month was similar to December 2019.

That meant the monthly pace of change in the index was lower, but it wasn’t yet clear if less intense cost pressures could be on the way in 2023, Olsen said.

“Local cost pressures and supply challenges, including labour market pressure, interest rates, stubbornly high inflation, and weather, look set to maintain supplier cost pressure into 2023.

“However, there is better news on the international front, with shipping costs easing back substantially, global food prices starting to ease, and fuel prices also being tempered.”

The monthly index tracks what it costs Foodstuffs supermarkets, including New World and Pak ’n Save, to buy products to put on the shelf.

Infometrics’ previous analysis showed supplier costs represented two-thirds of the shelf price charged by supermarkets.