How the food industry is tackling inflation

Published on
March 8, 2023
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How the Food Sector is Tackling Inflation

Inflation has a significant impact on the cost of living and can be particularly challenging for the food industry. The food industry is a crucial part of our daily lives, and its response to inflation is important.

In the UK, grocery price inflation hit a record 16.7% for the month of January. That is an incredible £800 more per year for the same basket of goods. This is the highest food inflation has been since 1977.

The huge rise in inflation across the economy has been caused by the Covid-19 pandemic, the war in Ukraine, labour, and general supply chain issues While the effects of the pandemic are beginning to lessen, the sector continues to be hit by new challenges.

In this blog post, we'll explore the actions being taken by wholesalers, manufacturers, and retailers in the food sector to tackle inflation. We'll also take a look at Whole Foods, as an example, of a retailer trying to combat the impact of inflation.

The Impact of Inflation in the Food Industry

Inflation has a profound effect on the food industry, and food prices can be particularly challenging for consumers. Inflation drives up the cost of producing food, which, in turn, increases the prices of food items on the shelves.

This is very likely to change customer behaviour. ASDA noted from sales data that many customers were limiting their purchases to £30, pointing to a “massive change” in behaviour.

The Role of Wholesalers, Manufacturers, and Retailers

Each player in the food industry has a different ability to respond to inflation. Wholesalers are responsible for procuring food products from manufacturers and selling them to retailers. Manufacturers, on the other hand, are responsible for producing the food items that wholesalers and retailers sell. Retailers, such as supermarkets or your local convenience sote, are the final link in the chain, selling the food products to consumers.

Wholesalers and manufacturers can respond to inflation by finding ways to lower production costs. For example, they may invest in more efficient production methods, reduce waste, or find alternative suppliers for raw materials. Retailers can respond to inflation by pressuring their suppliers to keep prices low, as Whole Foods is doing. Although this is rarely an option for small unaffiliated independent store owners.

Retailers can also respond by offering more competitive prices, which can attract more customers and increase sales. But this also risks eating into the margin they make on each product.

Whole Foods pushes back on inflation

Whole Foods, the Amazon-owned grocery chain, is reportedly asking its suppliers to help lower grocery prices. The retailer wants to reduce prices as inflation eases and is looking to its suppliers to help achieve this goal. Pressuring suppliers to keep prices low is common among retailers, and Whole Foods is no exception.

The grocery chain told its suppliers of packaged food products in December that it wants to lower on-the-shelf prices. The prices of many fresh groceries, such as produce and meat, tend to stabilize or fall when food inflation slows down. However, the prices of packaged foods have tended to remain the same even when inflation plateaus. As a result, Whole Foods is focusing its pressure on lowering the prices of these items.

Other Retailers and Their Responses to Inflation

Whole Foods is not the only retailer trying to combat the impact of inflation. Other retailers, such as Tesco, have hit back claiming ‘Food firms could be hiking prices unnecessarily’. A well-publicised argument in 2022 took place between large supermarket Tesco and Heinz over price rises on product lines - enough for Tesco to refuse to stock the popular brand until an agreement could be reached.

Some retailers have responded to inflation by offering more competitive prices which attract customers by offering low prices on a wide range of food items. For example, Tesco publicised a price lock on 1000 everyday items until Easter. Similarly Sainsburys has promised price matching on different lines but warned ‘its going to be tough’.

Convenience stores and inflation

Inflation can have a significant impact, particularly on convenience stores. Convenience stores typically lack the buying power of larger retail chains, making them more vulnerable to the effects of inflation on food prices. Wholesalers play a crucial role in negotiating and passing on any cost savings to retailers, but smaller stores may struggle to keep pace with price increases.

To maintain their margins, convenience stores must stay vigilant in monitoring their purchase costs and be ready to adjust their prices quickly in response to changes. Industry experts recommend being more careful when reviewing invoices and remaining agile in their pricing strategies.

One solution for independent stores is to use stock price comparison tools, such as Coral, which can help retailers find the best wholesale prices and stay ahead of inflation. By keeping a close eye on their costs and making informed decisions, convenience stores can help mitigate the effects of inflation on their business.

Future of the Food Industry and Inflation

The future of the food industry and inflation is uncertain. As the economy continues to grow, we can expect inflation to remain a challenge for the food industry. However, retailers, manufacturers, and wholesalers are likely to continue to find new and innovative ways to respond to inflation and keep food prices affordable for consumers.

In conclusion, the food industry is facing a unique set of challenges as it navigates the impact of inflation on its prices and products. Retailers such as Whole Foods are responding by asking suppliers to help lower prices, while others are using a variety of strategies to limit increases or maintain low prices for consumers. The future of the food industry and how it will continue to respond to inflation remains to be seen, but it is clear that companies will need to be creative and proactive in order to stay competitive in an increasingly challenging market.

At Coral, we understand the challenges that retailers face in the face of inflation and are dedicated to providing them with the tools they need to succeed. Our stock price comparison tool is designed to help retailers find the best wholesale prices, giving them the flexibility to adapt to changing market conditions.


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