Food inflation has slowed to its lowest rate since November 2021, presenting a promising development for consumers. However, despite this overall decline, the prices of specific items such as seafood, tea, and coffee continue to soar, according to recent data from the British Retail Consortium (BRC)-NielsenIQ Shop Price Index.
The BRC-NielsenIQ report reveals a deceleration in food inflation to 1.8% in November, a slight decrease from 1.9% the previous month. While ambient food inflation also eased to 2.7% from 3.1%, fresh food prices saw an uptick, rising to 1.2% from 1% in October. According to Helen Dickinson, BRC’s Chief Executive, fresh foods like seafood are particularly susceptible to high import and processing costs, which are more pronounced during the winter months. Dickinson noted that ‘seafood prices have been affected more than others due to these vulnerabilities.’
Additionally, tea prices remain elevated, primarily due to poor harvests in key growing regions, which have strained supply chains. Meanwhile, coffee prices, after experiencing a brief dip, are predicted to rise as global coffee prices near historic peaks. The challenges faced by these commodities underscore the complex dynamics affecting global food prices.
November also marked a shift in shop price inflation trends, with deflation slightly reversing to 0.6% from 0.8% in October. Mike Watkins, head of retailer and business insight at NielsenIQ, observed that while consumers are cautious, seeking bargains for essentials, the current level of inflation may boost consumer confidence ahead of festive promotions such as Black Friday. Additionally, with inflation lower than the previous year, food retailers are extending discounts and offers to maintain sales momentum through December.
Looking ahead, the retail sector is bracing for significant cost increases, amounting to £7 billion in 2025 due to changes in Employers’ National Insurance Contributions, business rates, an increase in the minimum wage, and a new packaging levy. Such pressures could lead to inevitable price increases, especially since the retail industry operates on narrow margins.
In response to these looming challenges, over 70 companies, including major retailers like Tesco and Sainsbury’s, have expressed concerns to Chancellor Rachel Reeves. These companies warn that changes in National Insurance Contributions could lead to unavoidable job losses and certain price hikes if the government does not intervene by adjusting timelines for new policies like the packaging levy.
Although the recent slowdown in food inflation offers a glimmer of hope, the cost of seafood, tea, and coffee remains persistently high, reminding consumers of the ongoing challenges within the market. As retailers navigate upcoming fiscal pressures, their ability to manage costs effectively will be crucial to maintaining affordability for consumers.
