New study warns Australians to brace for further price increases over the next 12 months
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Fresh reports suggest that price hikes on groceries were prompted by rising supplier costs.
Investment bank UBS has conducted research on the prices of essential items at Coles and Woolworths to examine the reason behind their "sudden" increases, claiming that the cost of commodities has risen more quickly than wages in the March quarter.
The study also comes after supermarket executives announced the possibility of them passing the supplier cost pressures on to checkouts during the year.
It was said that an increase of 4.3 per cent in the March quarter was observed in food prices at Woolworths — a deviation of almost 3 per cent from the previous period's 1.4 per cent.
Meanwhile, food prices at Coles rose by 3.2 per cent from last period's 1 per cent.
It was also revealed that red meat received the most inflation — an increase of 8.1 per cent over the past year — compared to dry packaged groceries.
A new study suggested that supermarket retailers are passing the burden of supplier costs to customers. Credit: TND.
However, UBS analysts warned Australians to brace for further price hikes as prices would continue to rise across most supermarket categories over the coming 12 months.
Additionally, the researchers emphasised that while some food categories are already experiencing price hikes — such as red meat, as previously mentioned — ongoing inflation will still be observed.
Elsewhere in the report, UBS said that while there wasn't much difference between the price hikes on fresh food items in both Woolworths and Coles, the researchers revealed that one chain is passing on much higher increases when it comes to dry groceries...
During the March quarter, the prices of fresh food at Woolworths rose by 4.9 per cent, while an increase of 4.6 per cent was observed at Coles.
However, when it comes to dry goods, researchers observed a price increase of 3.9 per cent at Woolworths — 1.5 per cent higher compared to the price hikes observed at Coles which was recorded to be 2.4 per cent.
It was suggested that Woolworths imposed higher increases in the prices of their dry goods compared to Coles. Credit: Shutterstock/haireena.
UBS analyst Shaun Cousins said: “Woolworths’ dry grocery inflation is well above Coles, arguably reflective of confidence from Woolworths that its more affluent customers can withstand price increases.”
The representatives of Woolworths and Coles said that internal and external factors were at play for the rising prices.
The extra costs from purchasing COVID prevention paraphernalia such as supplying RATs to workers and installing particular shields at checkouts were said to have driven up internal expenses and have eaten into profit margins.
Externally, supply-chain cost pressures were said to be the leading culprit for the hikes — higher international freight costs have pushed up the price of buying raw materials from overseas.
A Woolworths spokesperson confirmed that the company is currently working with its suppliers to sensitively manage the industry-wide inflationary pressure.
“We pay the market price for fresh fruit and veg, which can be influenced by a range of factors, including seasonality, weather, supply and demand,” the spokesperson said.
Meanwhile, a Coles spokesperson said that the company's "key focus" was to keep the prices of their groceries down.
The spokesperson quipped: “We appreciate that there are a number of factors driving inflation for all retailers, including increases in the cost of raw materials, energy price rises and freight costs.”
We encourage our members to check out the website's Money Saving Hacks page for tips on how to lower your grocery bills in this trying time. We also suggest checking out this link for the latest deals from Woolies and this page for Coles.
What are your thoughts on this? Should retailers pass the financial burden onto their customers?
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