Shoppers will see higher prices across the convenience sector from January as suppliers pass on cost increases, RN wholesale research shows.
After two years of food deflation, some retailers will welcome the transition, but many fear it will restart the discounters’ flagging growth.
Wholesalers contacted by RN said they have received notifications from around 20 suppliers in the past few weeks, including big brands such as Coca-Cola, Mondelez, Wrigley and AG Barr, warning of price increases of between 5% and 12% due to cost pressures and the weak pound following the Brexit vote. They said they have “no other option” than to pass the price increases onto retailers.
“We have seen price increases in the last few months, increases that are yet to be applied, and I believe we will see more as the year progresses,” said Philip Jenkins, managing director of buying group Sugro UK. “They are extensive and reflect increased costs in ingredient supply due to exchange rates – it will be interesting to see how consumers react.”
Wholesale expert David Gilroy told RN while the discounters are a threat he believed it could be an opportunity for convenience retailers. “Consumers will buy less in volume and they will trade down in value. The volume of sales will decline, but I think the multiples will suffer a lot more as consumers will buy little and often,” he said. “This could be an opportunity for convenience stores.”
A spokesman for Wrigley UK said it is the first time the company has raised the price of the products affected for five years, following cost pressures “building for some time”. This includes a 7.5% cost price increase for its Extra single packs and 10.1% for Extra Peppermint and Spearmint 46-pack bottles.
A Mondelez spokesman said increasing input costs “coupled with recent foreign exchange pressures, are making food products more expensive to make”.
These latest price increases follow rises by PepsiCo and Unilever in October.