IGD’s Chief Economist, James Walton and Health and Sustainable Diets Associate, Lizzy McHugh explore how inflation predictions may impact shopping habits and health.
Looking at the news, there is a sense across the UK and beyond, that everything is becoming more expensive. Whilst energy prices make up many of the headlines, food is also making a significant contribution to inflation, with the CPI (consumer price index) measuring food inflation at 9.8 % in June. This was slightly lower than predicted by IGD but there is likely to be further to go (Watch the latest video from IGD Economics).
In our Viewpoint special report IGD forecast that through 2022, food inflation will average between 10% and 12%, peaking at 14% to 16% in the summer, assuming that there is no change in circumstance. In reality businesses and shoppers will take steps to mitigate inflation so actual effective inflation rates will somewhat lower.
IGD has suggested a 8-9% increase in food bills for the average household. This will see a family of four needing to increase their spend on food and groceries from £396 per month to £439 per month. A family of two adults and two children will need to find an extra £43 per month or £516 over the year to pay for food. As a result, they are likely to pursue money saving tactics even more intensively. With further energy price increases expected in the autumn the impact on household budgets will be exacerbated.
When comparing the health of most deprived and least deprived households there is evidence that health is directly linked to available income with many people in the UK struggling to eat well even before the current inflation event. Evidence from previous recessions is that many shoppers will reduce purchasing of fresh fruit, vegetables, and perishables when money is tight.
Our ShopperVista survey found that concerningly, skipping meals has also become increasingly common, with shoppers on a lower income especially likely to be skipping meals frequently to save money. Higher income shoppers tell us they are more likely to plan meals, use leftovers and make packed lunches in future, to adapt to reduced household budgets.
In an attempt to help households manage their money the government has announced a Help for Households campaign which sees business and government offering deals and solutions across different sectors to save money. Below is how some of the large food retailers have joined up with government to provide deals to help families deal with the cost of living crisis:
- Sainsburys introduced a “feed your family for a fiver” campaign to help customers with budget friendly meal ideas to feed a family of four for less than a fiver
- ASDA have extended their “Kids eat for £1” where children under 16 can access a cold or hot meal for £1 at any time of the day in ASDA cafes
- Morrisons is providing a free meal for every child at in store cafes when a parent buys an adult meal
- Tesco Clubcard holders can get a free child’s meal in its cafes with any purchase made in store
Whilst this is a fantastic step to help families, we must recognise that the cost of living crisis is impacting shoppers in all socio-economic groups. In our latest shopper research, even the most affluent reported feeling significantly less confident about their finances in the coming year.
As well as the above short term fixes like the government programme or the industry measures longer term there needs to a solid economic programme towards prosperity led by government. Food businesses can also help by driving productivity and then rolling benefits into both lower prices for consumers and higher wages for employees.
For those whose finances have less flex, there may be tough decisions between heating homes and putting food on the table to come, which will no doubt influence people’s ability to consider health.
How are IGD responding to the crisis
Here at IGD we are working to drive change across society, business, and individuals to navigate these times.
- Working with 20 leading organisations across industry and the University of Leeds we are collaboratively testing behaviour change levers in real-life settings and identifying the most effective ways to make healthy and sustainable diets easy and accessible for everyone across income groups.
- More than ever, there is a clear opportunity for our industry to tackle food waste. We are supporting this through our ambition to halve food waste by 2030 and maximise food surplus redistribution. Measuring food waste data and taking action to reduce waste can create savings for businesses, whilst maximising redistribution ensures that surplus food reaches those who really need it rather than it being wasted.
For more on inflation see the below: