Cheaper products rising in line with other food prices

Earlier in the year, the ONS committed to calculating food price inflation for the lowest cost ranges. This was following criticism of food price inflation figures from food poverty campaigner, Jack Monroe.

Jack Monroe suggested that the experience of inflation that lowest income households feel is worse than the average due to a reduction of products in ‘value’ ranges.

The ONS has taken the lowest priced product available for 30 everyday grocery items over the year to April 2020. These items included fresh fruit and vegetables, meat, dairy, and cupboard staples.

Overall, inflation for the lowest cost items has risen broadly in line with overall food price inflation. Prices have risen by 6.7% across all food items compared to 6.0% for the lowest priced items. This suggests that over a full basket of goods, the most vulnerable shoppers are not being excessively exposed to inflation.

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Shoppers who purchase specific items may have seen considerable price changes. Pasta is up nearly 50%, whilst products such as potatoes, cheese and pizza have seen price reductions over the past year.

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IGD opinion

At first glance these results suggest that the lowest cost products are not rising at a faster rate than other food items and not exposing the most vulnerable shoppers to excessive inflation.

However, taking a deeper dive, we can see that the experience of vulnerable shoppers is unlikely to be similar to that of the average shopper.

If solely seeking to purchase the lowest cost items, a successful shop relies upon good product availability in order to maintain a less expensive basket of goods. However, as IGD research has shown, product availability is now a persistent problem for UK retailers and shoppers.

The ONS data suggests that for two-thirds of the items sampled, if a substitute is necessary due to a lack of availability the price would increase by at least 20%. This will have a significant impact on the price of a weekly shop for vulnerable households.

The average shopper can reduce the impact of inflation by trading down from better quality items. However, if you are already purchasing the lowest cost items there is no further ability to trade down to reduce your household experience of inflation.

Furthermore, lowest income households are more exposed to any food price inflation. The latest ONS data shows that the most vulnerable households spend 17% of the household income on food and alcohol, compared to 13% for the average household.

Food prices make up only one part of the cost of preparing a meal which includes transport to and from the store, refrigeration, and the energy to cook a meal. The recent 54% rise in domestic energy bills alongside record petrol prices have further increased the wider costs of preparing a meal.

Given commodity price inflation and supply chain concerns, retailer and suppliers mixes (range and proportions of products sold) are to come under pressure over the coming months. It is crucial this mix is maintained to suit shoppers at both ends of the income spectrum manage inflation. Suppliers and retailers should work alongside one another to ensure a continued supply of products meeting the needs of budget conscious shoppers.