The grocery industry is heading into a "perfect storm" as Christmas approaches because consumers are being forced to tighten their belts while raw material prices are on the rise, Asda's food trading director Darren Blackhurst has warned.
Blackhurst, speaking at this week's IGD Convention, said changing economic conditions and higher prices would lead to a slowdown in 2008 and warned suppliers they, too, faced difficult times.
"There are many customers feeling the price squeeze as they come off their fixed rate mortgages after several rises in interest rates," he said. "Debt levels are higher than they have ever been and times are getting tougher for many ordinary people. We are heading into the perfect storm as an industry. Customers have less to spend and, as costs go up, they will have to pay more for the food they buy."
But he warned suppliers: "Asda is not going to throw in the towel for our shoppers. Raw material rises will be offset by better efficiencies. Cost control is critical for everyone and we will have to make hard choices to ensure great value."
Blackhurst also used the convention to call on the industry to resolve the dispute between rival camps on front-of-pack labelling.
The industry should adopt hybrid GDA and traffic-light labelling similar to the system Asda began to roll out in September, he said. "We have researched this and customers like it," said Blackhurst. "We need consistency across the industry."
Meanwhile, IGD chief executive Joanne Denney-Finch called for supply chain collaboration in the face of tough times. "The world price of cereal crops has doubled, with similar increases for dairy commodities, and there was an emerging pattern of both drought and flooding around the world.
"This changing world of supply and demand means we need to strengthen our partnerships in the chain.
"This is absolutely critical for competitive edge and to secure supply. IGD found that 20% of the costs in an average food chain add absolutely no value to consumers at all. That's more than the total profit margin in many chains."