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Food prices have fallen for the first time in more than two years as inflation in the sector continued to ease.
However, the headline rate of inflation in the UK remained flat at 4% in the year to January as the increased cost of energy offset the fall in food.
The latest figures from the Office for National Statistics (ONS) this morning showed prices for food and non-alcoholic beverages fell on a monthly basis by 0.4%, marking the first decrease since September 2021.
The anual rate of food and drink inflation also eased from 8% in December to 7% last month, which is the tenth month in a row of slowing rises.
Bread and cereals were key drivers, with items such as cream crackers, sponge cake, and chocolate biscuits falling in price, although crisps, cooking sauces and instant coffee also helped.
However, food prices remain relatively high following sharp rises over the past two years, with the overal price up by about 25% between January 2022 and 2024, which compares to a 10% hike over the previous 10 years.
Inflation in alcohol and tobacco stood at 12.2% in January, down from 12.8% in December.
Balwinder Dhoot, director of sustainability and growth at the Food and Drink Federation, warned that ongoing navigation challenges in the Red Sea, coupled with rising shipping costs, could soon exert pressure on energy and food prices.
“The extent of this impact hinges on the duration of ship diversions from the Suez Canal and any escalations in the Middle East.
“We are also seeing increased regulatory costs being put on industry by government. To support food and drink manufacturers and help hard pressed shoppers, the government must reduce unnecessary regulatory burdens and urgently reassess costly ‘not for EU’ labelling requirements for food sold in Great Britain.”
Morning update
Volumes at Heineken have suffered as the Dutch brewer hiked prices to cope with inflationary pressures in 2023.
Revenues at the group increased 4.9% to €36.4bn in the year, with organic growth of 5.5%.
However, beer volumes declined 4.7%, with the Vietnamese and Nigerian markets making up the majority of the declines. Heineken also reported a 5.9% drop in premium beer volumes for the year, but grew by 1.1% when excluding Vietnam and the exit from Russia.
Operating profits at the brewer registered organic growth of 1.7% to €3.2bn.
Heineken forecast organic operating profit growth would remain low to high single digit in 2024.
CEO Dolf van den Brink said he was proud of the resilience shown by the business.
“After a strong 2022, 2023 proved to be challenging. Strong pricing to offset very high input and energy cost inflation and volatile macro-economic conditions in some key markets affected our volume momentum,” he said.
Looking to 2024, we remain cautious about the global economic and geo-political outlook. Our focus going forward will be on revenue growth, balanced between volume and value, by continuing to invest behind our brands, innovations, commercial capabilities and route-to-consumer to deliver long-term sustained value creation.”
Drinks bottler Coca-Cola HBC has grown organic revenues by 17% in 2023 to €10.2bn while also boosting volumes by 1.7%.
A 31.5% jump in coffee volumes and a 27.3% rise in energy drinks helped the European firm.
Net profits at the business rose 53% to €636.5m in the year.
CEO Zoran Bogdanovic said he was “deeply proud” to have delivered a third year of double-digit growth and record profits.
“The power of our 24/7 portfolio, our diversified country footprint and our sustained investment in building bespoke capabilities, driven by data, insights and analytics, are foundations of compounding growth,” he added.
The FTSE 100 nudged 0.3% higher to 7,532.10pts this morning.
Shares in Heineken sank 4.4% to €89.04 on the back of its results, while Coca-Cola HBC jumped 5.1% to 2,318p.
Yesterday in the City
The FTSE 100 fell 0.8% to 7,512.28pts yesterday.
It was a quiet day for fmcg with little newsflow, but Virgin Wines UK jumped 5.1% to 37p, while McBride rose 4.4% to 71p and Naked Wines increased 2.7% to 72p.
Just Eat Takeaway slumped 6.8% to 1,249p.
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