The boss of one of the nation’s largest independent supermarket chains, Ritchies, is bracing for a consumer downturn in the new year as energy bill shock and rising interest rates take their toll.
For now though, shoppers remain buoyant and are spending up on premium foods like prime cuts of meat.
Fred Harrison said he believed food inflation was currently running at around 6.5 to 7 per cent led by fresh food, with his shoppers “concerned” about the cost of living, but determined to fill their shopping baskets for Christmas and put off worrying about pressures on household budgets until later.
“People are concerned, but we haven’t seen a dramatic change in the shopping mix at this stage, people are still buying eye-fillet steak, T-bone, porterhouse steaks, and I would think that this will stick and people will remain optimistic through to Christmas,” said Mr Harrison, who oversees a network of 76 independent Ritchies supermarkets in Australia – the country’s largest independent chain.
“I think we are too close to Christmas now for people to go defensive or negative.
“I think, though, the new year is going to be a different story. I think it will be tough. When the Christmas credit cards in February and school returned, I think from February onwards, it will be a fair degree tougher.”
Mr Harrison said he was seeing fresh foods rising in prices, calling its price rise “extreme”, and that in general supermarket food and grocery prices had risen 6.5 to 7 per cent recently.
“We are not panicking, but we are just being mindful that we think it will be tougher and we are planning for it to be tougher from February, and that means we need to be focusing more on value for our shoppers.”
It comes as Ritchies posted sales of $1.38bn for the 12 months to July 2, up from $1.36bn recorded in 2021.
Annual net profit was stronger, hitting $44.2m from $30.9m in 2021.
Meanwhile, food inflation has become a key focus for supermarket chains.
The surge in consumer prices to a 32-year high has raised fears of slower growth, with treasurer Jim Chalmers declaring inflation “public enemy No. 1” after delivering his first federal budget.
Last week, CPI figures pointed to inflation running at 7.3 per cent, with Coles revealing last month inflation was particularly strong in fresh food with prices up 8.8 per cent, driven by key food items across wheat, bakery and fruit.
Total supermarket price inflation of 7.1 per cent was recorded for the first quarter at Coles, compared with 4.3 per cent in the fourth quarter.
Woolworths is expected to reveal its own food inflation figures on Thursday when it releases its first quarter report.
Mr Harrison said “life was returning to normal” in 2022 from the end of lockdowns and travel restrictions and that the Ritchies and Metcash wholesale network had held on to many of its gains made through the early years of the pandemic when shoppers stayed close to home and shopped locally – helping independent chains.
Mr Harrison said the meat category was one of Ritchie’s strongest categories through fiscal 2022.
“We did very well, the strongest part was meat, meat was outstanding and we have our own butchers, whereas Coles and Woolworths don‘t have their own butchers in store, we have our own that cut the meat in store and that has been a real win for us.”
Extracted from The Australian