Making the purchase already costs more: “There are products that are rising and of course it shows”

When prices rise, good the consumer realizes. This is the case of Carmen, who claims to know practically by heart how much the things she puts in the basket are worth. “I compare a lot, I go to certain places to buy products that I know will find cheaper there and I stop buying those that go up a lot,” she explains, sitting in the sun in a park in Chamberí. (Madrid) with two friends, Mercedes and Victoria, who have lived in the neighborhood for almost 80 years — “all our lives” —. “I do a lot of market research,” she jokes, “and, yes, there are products that go up a lot and of course it shows, outrageous.” More and more buyers are looking at prices. “Seven out of ten control the cost of their usual products,” explains Alberto Iglesias, expert at the consulting firm Nielsen IQ. Its surveys detected that 61% of consumers perceive increases in grocery stores compared to last summer.

Official statistics prove them right. Prices for food and non-alcoholic beverages rose 4.8% in January compared with the same month last year, according to the National Institute of Statistics. This is the second largest increase since 2008, surpassed only in the last month of 2021, when the increase reached 5%, after 3.3% in November and 1.7% in October. However, the increases are still lower than the general CPI (6.5% in December and 6.1% in January), partly because supermarkets are containing the increases at the expense of their margins to avoid losing customers in a market where competition is fierce. “Over the last quarter of the year, trade absorbed an average of 2.5 points of the general CPI and more than 5 points of the rise in prices in the food industry”, specifies one to the Anged , an association that represents mass distribution.

The question is to know with what intensity and until when the price increases can be contained. The unprecedented rise in energy prices is adding more and more tension and leading the sector towards a year 2022 where it will be difficult to maintain prices to save margins. “The strategies are not uniform: some supermarkets will increase prices and others will sacrifice margins to maintain them,” explains Enrique García, spokesperson for the Organization of Consumers and Users (OCU). This group detected in a study carried out in December an increase in the price of the basket compared to six months earlier: of the 23 products analyzed, 13 had increased. Moreover, the amount of the increases was much higher than that of the decreases.

A couple look at offers at the entrance to a supermarket in Madrid.Victor Sainz

The official January data collected by INE confirms this: in the detail of inflation data, striking increases are already seen last year, as is the case of olive oil (30%) , pasta (20%), flour (10%) and sheep meat (12.6%). Fruit also increased significantly (9%), although the truth is that the price was down in 2020 and is now recovering. Of the 55 categories of food and non-alcoholic beverages, only two have become cheaper. “We think it’s going to be a year with a lot of tension, especially in fresh produce,” predicts Enrique García.

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Supermarkets have tried, at least so far, to absorb some of the increases, mainly because the Spanish market wants to be competitive (prices are on average five points lower than those in the EU, according to Eurostat) and each point of market share is very valuable. “We are making a big containment effort so that this situation has the least possible impact on the consumer: transferring this increase as little and as late as possible”, explain sources from Lidl, the third chain with the largest share of market (nearly 7%), after Mercadona (25%) and Carrefour (9%).

Along the same lines, Dia admitted in a recent statement that he expects the factors driving these increases to continue this year: “The inflationary backdrop we experienced in 2021, marked by rising electricity, fuel and commodity prices, which are expected to last much of 2022, are generating inflationary pressures in the sector”.

Employer associations that represent companies are cautious. Forecasting is complicated because there is a lot of uncertainty around inflation and energy developments, as well as issues in the supply chain. The Managing Director of Asedas (Mercadona, Dia, Lidl and Froiz grouping), Ignacio García Magarzo, acknowledges: “It is true that at the moment we are facing enormous pressure on costs in the world which has to do , basically, with energy costs. . But many operators are working to ensure that the impact on consumer prices is as low as possible, because the Spanish food market is one of the most competitive in Europe”.

It is complicated to go into the details of the repercussions of the rise in inflation in the stores, because some consumers, who consider lamb meat to be expensive, are turning to pork, for example (the price has remained frozen in January year-on-year, according to the INE). Or they buy less quantity. “If I see that the prawns are very expensive, I don’t buy them; I have the impression that meat and fruit have increased a lot”, gives Carmen as an example. “If you have the time, you can buy at the best price at each place, you can make a difference,” adds her friend Victoria.

There are different reactions to the current inflationary environment. The most common, according to data from the AECOC (association of manufacturers and distributors), is to look for offers and promotions when making a purchase. 61% choose this way of adjusting the budget. “You find buyers who are more disloyal and who change brands to find better deals or who have increased their purchase of private label products,” explains its head of commercial strategy, Rosario Pedrosa. “There is also a minority who have either reduced their purchase volume or maintained it and are now spending a little more,” she adds.

Behind the increases is mainly energy, which is, after wages and the real estate factor, the main cost of running supermarkets. According to data from ACES, which represents Auchan Retail, Carrefour, Eroski and Supercor, food refrigeration installations account for more than 50% of energy consumption. The other half of energy expenditure is divided between air conditioning (more than 20%), lighting, ovens, boxes, among others. “Three quarters of the energy cost of the operational structure of stores and warehouses is devoted to the maintenance of refrigeration equipment”, explains Aurelio del Pino, president of the organization. Record fuel prices have also made transportation more expensive. Energy is the main concern, as warns García Magarzo, from Asedas. “The energy costs that our sector bears today jeopardize the sustainability of companies,” he warns.

Vegetable stand in a supermarket in Madrid.Victor Sainz

The energy hit isn’t even clear that it’s going to subside. The fixed-price contracts that many companies have with electricity distributors are currently being reviewed, and the impact could go further. The same goes for many contracts with manufacturers. “In the last quarter of the year, many contracts are usually renegotiated, and this is reflected at the end of the year and in January, which is why we expect more price increases in the first quarter of the year. ‘year”, explains Carlos Cotos, expert in consumer panels at the data and consulting firm Kantar. It is still early to anticipate what could happen beyond March.

The pressure on prices coincides with a period of return to pre-pandemic consumption patterns. The year with the most restrictions, 2020, has been positive for grocery stores as, apart from the costs generated by security changes due to covid, they have seen sales increase as home consumption has increased, both due to the closure of bars and restaurants, as well as the generalization of teleworking. Last year was more regular, but many of the routines of the pandemic have endured.

It remains to be seen what will happen this year. “There has been a real rise in pastes and oils, but for example, disinfectant cleaning products, which saw many sales in 2020, are down,” explains Alberto Iglesias, of Nielsen IQ. “All the indicators show that consumers are getting back to their habits,” stresses Rosario Pedrosa, of AECOC. “The consumer confidence index itself has recovered again after the fall it suffered at the end of 2021 with the appearance of the omicron variant, which suggests that the evolution of consumption is more conditioned by the health situation than by the current inflationary context. In addition, between 20% and 30% of consumers have recovered the expenses they had before the health crisis on leisure, catering and travel.

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