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Food inflation reached another record high in April, but the rate of price inflation may have peaked as cuts in wholesale prices start to filter through to consumers.
The BRC-Nielsen Shop Price Index for April found food inflation accelerated to 15.7%, up from 15% in March – the highest inflation rate in the food category on record.
Fresh food was up 17.8%, up from 17% in March, and ambient food was up 12.9% from 12.4% in the previous month – both the highest rates on record.
The spike in food prices was countered by non-food inflation decreasing to 5.5% in April, down from 5.9% in March.
Therefore, overall shop price annual inflation decelerated to 8.8% in April, down slightly from 8.9% in March.
British Retail Consortium CEO Helen Dickinson commented: “Overall shop price inflation eased slightly in April due to heavy spring discounting in clothing, footwear and furniture.
“However, food prices remained elevated given ongoing cost pressures throughout supply chain. The knock-on effect from increased production and packaging costs meant that ready meals became more expensive and coffee prices were also up due to the high cost of coffee beans, as well as key producer nations exporting less. Meanwhile, the price of butter and vegetable oils started to come down as retailers passed on cost savings from further up the supply chain.
“We should start to see food prices come down in the coming months as the cut to wholesale prices and other cost pressures filter through. In the meantime, retailers remain committed to helping their customers and keeping prices as low as possible. Government must also help by minimising the impact of oncoming regulatory burdens as these will hold back investment and ultimately contribute to ongoing high prices for already-squeezed households.”
Mike Watkins, head of retailer and business insight, NIQ, added: “In recent weeks, more retailers have used loyalty schemes or money-off promotions to help stimulate sales.
“However, with inflation yet to peak and sales volumes in decline in many channels, it’s difficult to second guess the strength of consumer confidence. Given the falls in disposable income we really need to see CPI back into single figures and a slowdown in food inflation to test shoppers` willingness to spend.”
Morning update
Wholesaler Kitwave has announced a ‘strong’ pre-close trading update for the six-months to 30 April 2023.
The group said its strong performance across all divisions continued throughout the first half of its financial year.
Due to the seasonality of the business, as in previous periods, there is a heavier weighting towards trading in the second half of the year. However, the board anticipates that the group’s results for the full financial year will be slightly ahead of market expectations.
It said it remained well-placed to mitigate risks from inflationary headwinds and the wider macroeconomic environment.
Meanwhile, the integration of its Westcountry Food Holdings acquisition has been “successful” and it is “performing in line with management expectations”.
CEO Paul Young commented: “Following a strong first half performance, and with the second half of the year typically driving increased trading, we expect full-year results will be slightly ahead of market expectations.
“With the considerable opportunities still available, both in the form of organic developments and through strategic, complementary acquisitions in a largely fragmented wholesale market, we have an excellent platform for growth. We look forward to continuing to deliver value to the group and its shareholders and updating the market on our continued progress.”
Elsewhere, premium drink mixers group East Imperial has posted double-digit top-line growth in its last financial year.
Sales in 2022 were up 14% over the year to £3.2m (230,973 cases), driven by growth in key established markets, off-trade, and direct-to-consumer channels.
In the US, case sales were up 68% over the year, with very strong sales (71%) in California as the company continues to build out in the luxury on-trade channel.
As in previous years, the company’s final two quarters saw the strongest revenue performance, with sales 1.4 times larger in the second half than the first.
Good fourth quarter momentum has continued into a strong start to 2023, with revenue for the first quarter up 41% year on year and overall case sales of 58,246, up 35% year-on-year, driven by the continued demand for ultra-premium products in key regions.
Operating loss was cut to £3.7m from £5.2m.
The group said it is in advanced discussions with potential debt funders to provide additional working capital to support ongoing expansion, with an announcement is expected “imminently”.
Tony Burt, Founder and CEO, said: “I’m delighted with our progress last year and, in particular, the popularity of our premium product range among existing and new customers, which has helped drive a double-digit rise in revenues.
The pandemic created some exceptional challenges, with much of the on-trade market still shut for large parts of last year. However, we experienced strong growth in the off-trade in New Zealand, benefiting from new supply agreements with major retailers. As the on-trade market began to emerge and open up in Asia in the second half, we’ve been very encouraged by the return of demand, particularly luxury on-trade.
“We have continued to invest in growth in 2022 and further strengthen the business’s fundamentals to position us for further expansion. Like every company in our sector, we have had to manage extraordinary supply chain headwinds and inflationary pressures impacting our costs. However, we plan to mitigate this impact through greater operational efficiency this year. The loss also reflects several one-off administrative costs due to the LSE listing process, but we are now in a strong position for profitability and growth.
“Consumers’ demand for ‘premiumisation’ continues unabated, underpinning our strategy and the long-term opportunity for East Imperial. I am confident we have the platform, the team and the resources to become the most admired premium brand of mixers and create a highly valued company for our shareholders.”
On the markets this morning, the FTSE 100 has opened flat at 7,863.3pts.
Early risers include McBride, up 4.1% to 33.1p, Hilton Food Group, up 4% to 705p and Greencore, up 2.9% to 88.25p.
Fallers include Deliveroo, down 1.2% to 108.1p and Reckitt Benckiser, down 0.4% to 6,402p.
This week in the City
After the flurry of results over the past couple weeks, the post- May Day Bank Holiday week looks a little quieter, although there are still a few announcements in the diary.
Later this morning sees Ocado host its AGM, with Reckitt Benckiser’s tomorrow.
Tomorrow brings a Q1 trading update from European Coke bottler Coca-Cola HBC and GSK spin-off Haleon.
In the US Kraft Heinz posts its first quarter results on Wednesday.
Thursday sees a trading update and AGM for Glanbia. Kellogg’s will post its Q1s and Post Holdings will issue half-year results.
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