Is UK about to see ‘massive’ food price hikes?

The rising cost in food prices is nothing new. It is something we have all noticed; from the humble loaf of bread (remember when it cost around 40p a loaf?) to the innocuous sack of spuds, it seems that everywhere you look there’s a price increase. And where there’s an increase there’s always a pretty good reason for it. ‘It’s the terrible weather’ we hear, or ‘Blame the oil prices’ is another excuse. But in an interview to The Sun newspaper today, Waitrose Managing Director Mark Price said that Britain’s recent food price rises are “just the tip of the iceberg,” and consumers should brace themselves for “massive” hikes in certain commodities this year.

Photo Credit: PA

Photo Credit: PA

Mr Price put the rise in costs down to the un-seasonally high rainfall the UK suffered from last year, and said that farmers had not been able to plant crops for 2013. This meant that food price inflation would steadily increase as shortages would mean demand would exceed supply.

Mr Price told the Sun: “We’re seeing input food inflation of around 3 to 3.5pc, but we expect it go up to as much as five. In some commodities, the increases will be massive,” he added.

“It’s bread, vegetables, all produce. The apple crop was down 20 to 30 per cent so apple prices have to go up. You have only seen the tip of the iceberg,” said Mr Price.

Last year was the second wettest year across the UK in records dating back more than a century to 1910.

However, the shortages of certain commodities does not appear to have affected Waitroses’ profits as the store enjoyed record sales over Christmas, as for the first time its total sales broke through the £300 million barrier and it managed to entice more customers from Britain’s other four big supermarkets, namely Asda, Tescos. Sainsburys and Morrisons.

The company, owned by the John Lewis Partnership, said like-for-like sales rose 5.4pc between December 18 and December 31.

Although Waitrose will have to go a long way to catch up with Tescos who have a market share of 30.7% compared to their 4.5%. However, this did not stop Waitrose from opening 18 new shops last year, including eight convenience stores, taking its total to 288.

Mark Price, managing director of Waitrose, said sales of fresh food, champagne, and party food particularly accelerated over Christmas for the company.

He added: “Our sales for the festive period as a whole have been record-breaking but the 12 trading days leading up to New Year’s Eve were exceptional as customers got ready for family entertaining and parties. The combination of our inspiring celebratory food and drink together with great value and offers proved to be a winning combination.”

It has been predicted that Morrisons Christmas trading figures could be down by more than 2.5pc, and Philip Dorgan, analyst at Panmure Gordon, said the Bradford-based retailer could be forced to issue a profits warning.

He added: “Whether there is a profit warning accompanying Monday’s trading statement is a moot point. We do, however, see further downside to consensus profits, given the likely continued sales underperformance and we believe that management would be best advised to realign expectations. This would enable it to focus on fixing its business, rather than defending an unsustainable level of profit, which would only result in its problems compounding.”

Last January, Tesco issued a profits warning after disappointing Christmas trading.

However, analyst at Deutsche Bank expect the retailer to post like-for-like sales growth of 0.8pc in the UK for this Christmas as its recovery from the profits warning gathers pace.

Source: The Telegraph

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