Coles and Woolworths food prices rise by 9.6 per cent in past year, outpacing inflation rate

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Australian supermarket food prices have increased by a new peak of nearly 10 per cent over the past 12 months, outpacing annual inflation as the cost of living continues to rise.

Newly published analysis, conducted by investment bank UBS, found prices at Coles and Woolworths had increased by 9.6 per cent over the past 12 months to April.

UBS Australia’s Evidence Lab collates the data by tracking more than 60,000 food prices online across the two supermarket chains monthly.

It found Coles prices had jumped sharply in April, up 10.5 per cent over the past year, compared to a 9.1 per cent annual rise in March.

Comparatively, Woolworths saw a decline in food inflation in April, down to 8.7 per cent, from 9.7 per cent in March.

The April study shows Coles has now overtaken Woolworths for price rises over the past year, although Woolworths has traditionally been ahead of Coles in lifting prices over recent years.

The analysts at UBS had previously forecast that food inflation had peaked in December 2022.

UBS analyst Shaun Cousins said the rise in food inflation was surprising, despite the volatility in monthly pricing data.

“The increasing rate of food inflation is a surprise, and inconsistent with the declines reported by [Coles] and [Woolworths] in the [third quarter of 2023],” he said.

“We suggest the achievement of a new peak in food inflation (excluding tobacco) is due to ongoing cost pressures on suppliers due to commodities and the domestic supply chain including labour.”

Mr Cousins noted that more consumers have shifted to private-label products as prices continue rising, and expects that trend will continue.

He said it is likely food inflation peaked in April, and expects modest declines over the rest of the year.

The increase in supermarket and food price inflation outpaces the rate of inflation recorded by the Australian Bureau of Statistics.

In the March quarterly data released last month, Australia’s inflation rate was 7 per cent, while the inflation rate for food and non-alcoholic beverages was 8 per cent.

Woolworths and Coles hold roughly 70 per cent of the grocery market in Australia between them.

In a statement, Coles said UBS’s analysis was “not an accurate measure” of how it calculates and reports inflation.

“Our official inflation figure was reported significantly lower at 6.2 per cent,” a Coles spokesperson said.

In its third quarter sales report released earlier this month, Woolworths reported its average prices had increased by 9.5 per cent in the year prior.

A Woolworths spokesperson said the supermarket giant is paying higher wholesale prices to suppliers, which is driving higher food prices.

Woolworths also noted that UBS uses a different methodology to calculate inflation.

Meat and dairy prices remain high

A separate study of food and beverage prices by UBS analyst Evan Karatzas found inflation for dairy, spreads, meat and fruits and vegetables had increased by 9 per cent over the year to April.

The UBS research found dairy and spreads prices had increased by 13 per cent in April, while meat prices had increased by 9 per cent and the price for fruits and vegetables remained flat.

Mr Karatzas’s report noted that meat prices have stabilised but remain at high levels, although that is expected to fall.

“Dollar meat prices across the main categories are starting to decline [month-on-month], although still remain elevated relative to the prior period,” Mr Karatzas said.

Compared to March, chicken and pork prices increased by 10 per cent in April, followed by beef with a 7 per cent increase, and lamb, with an increase of 11 per cent.

Fruit and vegetable prices have also begun to stabilise due to better supply, after weather-related disruptions last year, he said.

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By business reporter Kate Ainsworth (Original ABC Article)