Grocery prices have fallen by 0.6% since July, according to the first results of The Grocer Price Index, launched this week. The results of the index, based on the prices of 100 grocery items stocked by the big four retailers, support industry concerns regarding the long-term profitability of the supplier base.
Analysts agree that key factors causing a deflationary market include the impact of Morrisons’ takeover of Safeway, seasonality and promotional activity. The level of deflation may well have been even greater were it not for a seasonal bounce upwards for the cost of certain products such as fruit and veg.
With little evidence that the market is set to come out of this cycle, Tony Smith, customer management director at Unilever UK Foods, said deflation is one of the most serious issues facing the food and drink industry.