NEW ZEALAND BUSINESS NEWS
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Annual food price inflation in the Foodstuffs co-operatives’ comparable basket was 1.6% in September, compared with 2.4% for the Stats NZ food price index over the same period. The co-operatives operate New World, PAK’nSAVE and Four Square.
The 1.6% figure also sits well below New Zealand’s annual inflation rate of 4.1%, even as cost pressure builds from a weaker New Zealand dollar and sharply higher fuel prices.
Supplier costs for products in the co-operatives’ comparable basket were up 3.3% year on year in September. The wider Infometrics Grocery Supplier Cost Index, which tracks more than 60,000 goods stocked across Foodstuffs’ 500-plus stores, rose 1.9% for the year.
The gap between the two measures matters for anyone selling into the grocery channel. Input costs are climbing at roughly twice the rate of the basket the co-operatives track against Stats NZ’s categories, using the same weightings and year-on-year method.
Two forces sit behind that. On a trade-weighted basis, the New Zealand dollar is about 14% below where it stood five years ago, which raises the landed cost of imported groceries and the ingredients and packaging that go into locally made lines. Everyday categories with heavy imported content carry the most exposure.
Fuel has moved at the same time. The Asian benchmark price for refined diesel is around 90% higher than before the Middle East conflict began, and that increase is passed through farming, fishing, processing, packaging, shipping, and domestic distribution before a product reaches a store.
Fruit and vegetable prices are driven largely by supply and demand, and September’s basket showed how far a surplus can move retail prices. Cabbage was down 43.6% year on year, tomatoes 34.6%, lettuce 31.9%, cauliflower 30.6% and broccoli 23.2%.
Staples also fell. Free-range eggs were down 21.1%, standard eggs 13.3%, butter 12.0% and olive oil 11.7%.
For growers, a flush of cauliflower and broccoli means crops are sometimes sold below the cost of production once extra diesel and fertiliser costs are accounted for. Produce deflation is a genuine challenge at the farm gate even where it is good news at the till.
Other lines went the other way. Onions rose 110.5%, dried apricots 47.2%, potatoes 30.4%, grapes 24.5%, avocados 20.9%, honey 20.8% and kumara 19.4%. Several of the larger increases reflect unusually low prices a year earlier, particularly for potatoes and onions.
Warmer weather is widening the range of produce on shelves, with asparagus and early-season strawberries now available. Asparagus volumes are expected to increase and prices to ease, and the outdoor strawberry crop is expected to be plentiful, with no shortages anticipated as spring progresses.
For food businesses buying through the grocery channel, the 3.3% supplier cost increase is the number to plan against rather than the 1.6% basket rate. Suppliers facing a dollar 14% weaker than five years ago and diesel at roughly double its pre-conflict benchmark have limited room to hold prices, and the co-operatives’ own basket measure lags those input movements.
Hospitality and food service operators buying produce have a more mixed picture. Cabbage, tomatoes, lettuce, cauliflower, broccoli and eggs are all materially cheaper than a year ago, while onions, potatoes, kumara and avocados are materially dearer. Menus built around cheaper vegetables have a cost advantage that may not last once the surplus is gone.
Exporters face the mirror image of the currency effect. A lower dollar lifts returns on overseas sales, but strong offshore prices for dairy and red meat feed back into domestic prices for the same products, so the benefit is not uniform across a diversified operation.
Chicken is positioned as a value protein option heading into the warmer months, with kebabs and butterflied chicken suited to outdoor cooking.
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