Food price inflation in Europe has been cooling down, with the first month-on-month decline in almost two years recorded last month, new insights into food pricing from ING show.
Despite a 0.2% drop in EU food inflation in July, according to ING, food prices remain at high levels. EU consumers currently pay almost 30% more for groceries than in early 2021.
However, there are some considerable differences across the EU. In Ireland, food prices went up by 19% since January 2021, compared to Hungary where price rose by over 60%, ING said.
Many branded food manufactures are reporting lower sales as shoppers turn to more affordable foods. High food prices and slow growth are expected to keep those volumes low, ING said.
EU food price inflation
With inflationary trends in the cost base of food manufacturers and retailers still present, ING said it is too early to forecast a prolonged period of decreasing food prices.
However, ING said that due to developments in underlying costs for food producers, including higher wages, consumer food prices will likely hover around their summer levels for a while.
“When there are decreases in general prices, those will be the result of trends in specific categories, such as dairy, rather than being widely supported across all categories,” it said.
While world market prices for wheat, corn, meat, dairy and a range of vegetable oils are down year-on-year, prices for sugar and cocoa “rallied considerably” in 2023, ING said.
Despite much lower energy prices in Europe compared to their peak in 2022, ING said that they are sill much higher than before the pandemic, making up 3-5% of food manufacturers’ costs.
An increase in promotional activity is likely, ING said, as brands step up their efforts to re-attract consumers and boost volume growth.
Germany is the only country in the EU in which food prices dropped for several months in a row. Food prices were 1.4% lower last month when compared to their peak in March 2023, ING said.
This is due to lower prices for dairy products, fresh vegetables, margarine and sunflower oil. Unlike in most EU countries, discounters have a relatively large market share in Germany.
As a result of the “large and competitive” German market, and “strong negotiations” between food retailers and suppliers, ING said, retail food prices started to drop earlier.