Food inflation could be all but gone by Easter, according to the owner of Kingsmill bread, Twinings tea and Silver Spoon sugar – as long as there are no further shocks to the global system.
George Weston, the chief executive of Associated British Foods (ABF), which also owns the Primark budget clothing chain, said: “Food price inflation hit 20% last year and by the back of 2024 I think it will be close to zero.
“I would not be surprised if by the middle of next year, and even by Easter, most of the big price inflation had gone away,” he added, with the caveat that there were no further major problems beyond the conflicts in Gaza and Ukraine.
Reporting a 25% rise in pre-tax profits to £1.3bn after sales rose 15% to £19.75bn, Weston said that while inflation remained in some commodities including sugar, tomatoes and onions, key ingredients including cereals and edible oils had already come down in price that would feed into a variety of other products such as poultry.
Weston’s comments followed industry data indicating that UK food price inflation had dropped to single digits for the first time since July 2022, helping to ease the cost of living crisis.
Grocery price inflation slowed to 9.7% in the four weeks to 29 October, according to the data company Kantar.
Fraser McKevitt, the head of retail and consumer insight at Kantar, said that year-on-year price falls were only happening in a limited number of major categories including butter, dried pasta and milk.
However, McKevitt added: “Retailers continue to look at ways of softening the blow for shoppers and slowing the rate of price rises. This has included upping the ante on promotions – every single one of the grocers increased the proportion of sales through deals versus last year which is something that has only happened on one other occasion in nearly 10 years.”
Weston added that inflation on clothing was also falling away. Sales at established Primark stores rose by 8.5% in the year to 16 September but profits fell by 2.8% to £735m as the company raised prices by an average 8%.
While labour costs continue to rise, Weston said this was offset by falls in the cost of transporting goods and on key materials, including cotton.
He said consumer demand remained uncertain, but that clothing sales had stepped up a gear – to more than 10% – since the arrival of cold weather in recent weeks.
Weston said that recent pay rises had moved ahead of inflation suggesting that “maybe the worst of the cost of living crisis is behind lots of families”.
Weston said that recent strong sales meant fears of having too much stock had receded, reducing pressure for a flood of discounting in the run up to Christmas.
“Our Christmas collections are selling well,” Weston said, adding that sales of Christmas jumpers were up by 40% on this time last year as households shifted their spending earlier in an effort to spread festive costs over several pay packets.
Primark’s sales growth in the year ahead will be aided by the addition of 1m sq ft of new selling space, about a third of which is likely to be in the US, with the rest in Europe including Italy, Spain and France.
The chain has been helped by the collapse of several major UK rivals including Debenhams and Topshop, which have now exited the high street and only sell online.
However, Weston said the value of goods stolen from Primark had doubled year-on-year, partly because of the rise of organised shoplifting gangs – an issue already highlighted by the likes of John Lewis.