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Food and drink prices have soared higher than the headline rate of inflation in June as sharp rises in input costs fed through to supermarket shelves.
It comes as the latest UK inflation rate hit a new 40-year high, jumping to 9.4% in the 12 months to June, up from 9.1% a month earlier, according to the Office for National Statistics.
Food and non-alcoholic drink prices rose by 9.8% in the year to June, compared with 9.7% in May. It is the highest rate recorded since March 2009.
The ONS said the annual rate partly reflected price rises over the latest few months, including a 1.2% rise between May and June - the largest monthly rise between the two months since 2008. It follows similar monthly rises into April and May.
The biggest driver for the increase in food prices came from milk, cheese and eggs, while vegetables, meat and ready meals also contributed.
It follows predictions from Kantar yesterday that supermarket bills are set to rise by an average of £454 this year.
British Retail Consortium CEO Helen Dickinson said this morning that rising inflation was heavily driven by increased production costs.
” Food prices have been sharply hit by soaring global commodity prices and the rising costs of animal feed and fertilizer, both exacerbated by the war in Ukraine,” she added. “Across the board, non-food products are being impacted by haulage and shipping costs, whilst surging energy prices are making stores increasingly expensive to run.
“In the face of rising pressures in supply chains and operations, retailers are doing all they can to absorb as much of these costs as possible and look for efficiencies in their businesses. Retailers are expanding their value ranges to offer the widest variety of goods to those most in need, providing discounts to vulnerable groups, and raising staff pay.
“Until inflation is brought to heel, however, it will be a difficult road ahead for households and businesses in the UK.”
Fuel costs were the other main driver for the June rise in the UK inflation rate as petrol and diesel prices hit new records.
Transport costs overall were 15.2% higher in June, while petrol and diesel prices went up by 42.3%, the highest rate since at least 1989.
Average petrol prices were 184p per litre in June, the highest on record, compared with 129.7p a litre a year earlier. The average price of diesel was also the highest recorded, at 192.4p per litre.
ONS chief economist Grant Fitzner said: “Annual inflation again rose to stand at its highest rate for over 40 years. The increse was driven by rising fuel and food prices, these were only slightly offset by falling second-hand car prices.”
He added that the cost of raw materials and goods leaving factories continued to rise, driven by higher metal and food prices respectively.
“These increases saw raw materials post their highest annual increase on record, with manufactured goods at a 45-year high,” he said.
Morning update
Premier Foods has reported a “strong start” to its financial year as budget-conscious shoppers turned to its range of familiar brands for cheap meals despite price rises across its product portfolio.
Group sales in the 13 weeks to 2 July rose 6% year on year, while branded sales increased 4.2%.
The business reported continued market share gains in store and online, and further positive momentum overseas where sales jumped 12%.
CEO Alex Whitehouse confirmed Premier had made “good progress” in recovering input cost inflation through a range of measures, including pricing and efficiencies.
Premier left its forecasts for the year unchanged and added it expected to continue to realise further shareholder value through the ongoing delivery of its growth strategy.
“Consumers are increasingly looking to cook tasty affordable meals at home; this fits well with our broad portfolio of brands and was illustrated by the strong performance of Batchelors and Nissin in the quarter,” Whitehouse said.
“With this positive trading momentum behind us, we remain firmly on track to deliver our expectations for the year.”
Within its grocery division, sales rose 6.3% in the first quarter, with branded sales 4.5% ahead of the prior year as Batchelors and Nissin performed “particularly well”.
However, branded volumes were slightly lower in the period as it pushed through price hikes across the portfolio and lapped figures while Covid restrictions were still in place.
A strong recovery in out-of-home sales compared with the prior year helped the company register non-branded growth of 17.1%.
Sales in the sweet treats division increased by 5.1%, with branded sales up 3.3% and non-branded sales 26.8% higher than last year.
Cadbury cake enjoyed a strong quarter, demonstrating resilient volumes and Mr Kipling sales were higher despite timing changes to promotional activity, Premier added.
The healthier range of non-HFSS Mr Kipling Deliciously Good cakes were launched in the period and had been “very well received” by consumers.
Non branded sales growth was due to contract gains in pies and tarts and pricing benefits.
Cake and bread supplier Finsbury Food Group has called its full-year performance “robust” in a pre-close trading update.
The bakery group met market expectations despite battling “exceptional macroeconomic and inflationary headwinds”.
Total sales increased 13.9% to £356.8m, with volumes up 8.7%, as business accelerated in the second half of the year, with H2 revenues up 18.7%.
Growth was driven by a stable performance in the group’s core UK bakery division, with sales 12.1% higher, which Finsbury attributed to a continuation of the recovery in foodservice (up38.1%) and a 26.6% increase in the overseas operation.
“The company has continued to be challenged by the persistent pressure from input cost inflation, staff shortages and other supply chain disruptions,” the statement said.
“Pleasingly, it was able to mostly mitigate the impact of these pressures through revised commercial arrangements, operational improvements and other supply chain initiatives. It will continue in the same vein as further inflationary cost pressures are expected in the new financial year.”
Finsbury also renegotiated its banking arrangements and agreed a new £120m credit facility to help its puruse “significant growth ambitions”.
The FTSE 100 maintained momentum this morning in the face of rising inflation to open 0.3% higher at 7,320pts.
Shares in Premier Foods dipped 0.6% to 110p despite the positive trading update as investor outlook for fmcg remained mixed.
However, Finsbury jumped 5.9% to 72p on news it had strengthened it balance sheet with new banking facilities.
Elsewhere, Fever-Tree continued its recovery (see below) to rise another 6.4% to 1,115.5p, Bakkavor is up 5.2% to 87.3p, and Just Eat Takeaway rose 3.9% to 1,322.4p.
Fallers included Nichols, down 5.1% to 1,205p, Hotel Chocolat Group, down 1.1% to 128.1p, and Reckitt Benckiser, down 0.5% to 6,390p.
Yesterday in the City
The FTSE 100 jumped 1% yesterday to 7,294.84pts.
Shares in Hotel Chocolat Group melted after the upmarket chocolatier warned it would tumble to a loss as it withdrew from the US and Japanese markets. The stock slumped 45% to 129.8p despite sales jumping 37%.
Other fallers included THG, down 7.3% to 71.6p, Ocado, down 3.8% to 750.4p, and newly listed Haleon, down 2.4% to 301.1p.
Fever-Tree Drinks continued to bounce back from its drubbing last week, up 12.5% to 1,038p, and Deliveroo also rose again, up another 7.2% to 97.6p.
Premier Foods rose a healthy 4.7% to 110.1p ahead of this morning’s Q1 update, and Vimto maker Nichols and WH Smith were also among the risers, up 7.2% to 1,260p and 4.9% to 1,471p respectively.
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