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Food prices accelerated at their fastest rate in more than decade as retail trade body the BRC warns inflation is set “to get worse before it gets better”.
The latest monthly shop price index from the British Retail Consortium and NielsenIQ showed food inflation raced to 4.5% in May, shooting up from 3.5% in the previous month.
Its the highest rate since April 2012.
Fresh food prices rose to 4.5% last month, up from 3.4% in April and the highest rate since November 2012, while ambient food inflation increased from 3.5% to 4%, its highest rate of increase since January 2013.
Inflation in non-food retail actually slowed to 2% in May, down from 2.2% the month before, but remained closed to the series’ high.
It put overall shop price annual inflation at 2.8% in May, up from 2.7% in April, marking the highest rate since July 2011.
Mike Watkins, head of retailer and business insight at NielsenIQ, said the acceleration in food inflation reflected the fact that retailers could no longer absorb the full extent of increased supply chain costs now hitting the industry.
“Promotions remain close to an all-time low and price cuts rather than volume-based offers such as multibuy are now the best way for retailers to help their shoppers manage their household budgets,” he added.
BRC chief executive Helen Dickinson said the situation for consumers was likely to get worse before it got better.
“Fresh food inflation hit its highest rate in a decade, with items like poultry and margarine seeing some of the largest increases due to soaring costs of animal feed and near-record global food prices,” she added.
“Retailers have been working hard to protect their customers from these rising costs, particularly at a time when households are being impacted by a huge rise in household energy bills.”
Morning update
Parsley Box has lowered it sales expectations for the year as orders fell and the group continued to struggle in a challenging environment.
As a result of lower order volumes in the five months ended 31 May, sales for the period are about 11% below management forecasts.
The ready meals provider said in the trading update that it would return to revenue growth in the second half by investing in marketing again and continuing with product innovation, as well as adding new non-food products.
It added, in light of the current macroeconomic environment, that it was taking “a prudent view” for the remainder of the year and expected revenues to be in the region of £22.5m
Despite lower sales, Parsley Box has kept tight control of costs and has stocked up to hedge any cost increases, which has limited the impact on its losses.
EBITDA losses are expected to improve 44% from last year and come in at about £4m, which is better than previously expected.
CEO Kevin Dorren said the group continued to navigate a challenging consumer environment suffering from a well-documented reduction in consumer confidence, but was making progress.
“Our excellent value ambient meal range is well suited to allow us to hedge short term inflation pressure and we hope this will help alleviate pressure on our customers’ wallet.
“We remain well funded and confident that our product innovation, recommenced targeted marketing strategies and strong cash position will enable us to retain and grow our customer base in our over 65 target market, and return the group to sales growth in the second half of the year.”
Shares in Parsley Box plummeted 13.5% as markets opened to a new low of 16p. The stock is down from an IPO price of 200p and has fallen 52% so far this year.
Yesterday in the City
The FTSE 100 ended the day down 0.1% to 7,594.29pts.
It was a day of contrasts for B&M European Value Retail and Unilever.
Discounter B&M saw shares plummet 15% to 389.7p as it unveiled CFO Alex Russo as the successor to outgoing boss Simon Arora. The company also revealed its rate of sales decline accelerated in the first eight weeks of the 2023 financial year.
Unilever soared 9% to 3,825p after it confirmed the appointment of activist investor Nelson Peltz, whose New York hedge fund Train Partners has amassed a 1.5% stake in the group.
Other risers included Paypoint, PZ Cussons and Science in Sport, rising 5.5% to 580p, 1% to 202.5p and 1.7% to 61.5p respectively.
Fevertree Drinks, Glanbia and Hilton Food Group were among the fallers, down 2.4% to 1,538p, 5.3% to €10.83 and 2.5% to 1,086p.
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