The prices in supermarkets and discounters are getting higher and higher. According to a study, there is no end in sight to the rising prices. On the contrary: the worst could still come.
People in Germany will probably have to pay significantly more for groceries in the coming months. “In Germany, food retail prices are likely to increase by more than ten percent in 2022,” says trade expert Aurélien Duthoit from credit insurer Allianz Trade, summarizing the results of a study. Converted, this corresponds to an average of 250 euros in additional costs per person per year.
Despite the recent increases, retail food prices are far from reflecting actual food price increases over the past 18 months. “The worst is yet to come for households,” warns Duthoit.
Retail prices will adjust to higher producer prices
According to the study, food and beverage manufacturers have increased their prices in Germany by an average of 16.6 percent since the beginning of 2021. The surcharges were strongest for everyday products, including oils and fats (53 percent), flour (28 percent) and pasta (19 percent) – mainly driven by the Russian invasion of Ukraine.
In contrast, food retail prices have risen by a comparatively modest 6 percent, according to the study. In food retailing, 75 percent of the total costs are accounted for by purchasing. So there is still some catching up to do here. “History has shown that retail prices generally adjust to producer prices, albeit with a certain lag,” says Duthoit.
“Price increases are likely to pass through to consumer prices in a timely manner and to a large extent”
The overall inflation rate in Germany is already climbing to new heights. In April, consumer prices rose by 7.4 percent year-on-year, the fastest since the early 1980s – driven in part by food. According to the first May data from the Federal Statistical Office, experts expect an acceleration to 7.6 percent.
Inflation and post-pandemic declines in in-store grocery sales have put profitability in grocery retail under pressure, Duthoit says. “In this respect, the price increases are likely to impact consumer prices in a timely manner and to a large extent.”
What are the causes?
In fact, in a survey by the Ifo Institute, nine out of ten food and beverage retail companies said they were planning further price increases. The main reason for the rising prices is the higher cost of energy, raw materials, other preliminary products and commodities, according to the Ifo.
The agricultural sector has also recently provided anything but reassuring signals for consumers. The German Farmers’ Association recently warned that the tense situation on the agricultural markets as a result of the Ukraine war will probably last for months. It can be assumed that the critical supply situation will last well into the coming year and beyond the 2023 harvest, said Deputy Secretary General Udo Hemmerlin. Therefore, there will also be further price increases for consumers.
Asparagus becomes a slow seller
An example: dairy products. According to the responsible industry association, they could soon become significantly more expensive. “In the case of dairy products with longer contract terms, the price increases in the shop have not really arrived in some cases. That will only happen in the coming weeks and months,” said Björn Börgermann, Managing Director of the Dairy Industry Association, recently to the “Neue Osnabrücker Zeitung”. Rates of increase of 20 percent could be possible.
Asparagus farmers, for example, are feeling the effects of the fact that consumers already have less money in their wallets. Claudio Gläßer from the Agrarmarkt-Informations-Gesellschaft says that asparagus is an “essential vegetable” that many people associate with higher prices. The result: although asparagus is cheaper than it has been for a long time, significantly less is being bought this season than a year ago.
Rewe and Edeka bosses want to avert food price increases
The large retail chains are meanwhile trying to at least dampen the rise in food prices overall. Edeka boss Markus Mosa has repeatedly appealed to the big brand manufacturers not to overdo the price increases. Rising consumer prices should not be used as an alibi for corporations to maximize returns with excessive demands. Edeka will therefore avert avoidable price increases in negotiations with the manufacturers. Unavoidable price increases should not only be imposed on consumers, but should be distributed along the entire value chain. Rewe boss Lionel Souque made a similar statement.