Daily Reports
The inflationary crisis that has impacted food shelves for the past two years, initially triggered by surges in raw material prices at the end of 2021 and exacerbated by the conflict in Ukraine, appears to be stabilizing. According to Circana's monthly data, prices for consumer food products fell by a modest 0.1% year-on-year in May, marking the first such deflation since December 2021. Despite this slight decrease, prices are still significantly higher than pre-crisis levels, averaging an increase of 15.9% over the past two years.
Consumers might not immediately notice this decrease when shopping, as overall prices remain elevated. Significant reductions have been observed in specific categories, such as men's care products (-8.7%), cooked poultry hams (-5.8%), shower gels (-5.5%), and frozen desserts and pastas (-4.2%). On the other hand, prices for items like canned flageolets, oils, canned sweet corn, and fruit juices have seen substantial increases.
The decline in prices is more notable in the hygiene and cleaning product sectors, which saw a decrease of 2.2% over the past year. Experts attribute this to the impact of the Descrozaille law (EGalim 3), which has tightly restricted promotional offers in these categories, leading manufacturers to avoid passing on price increases due to the risk of losing volume. Emily Mayer, a mass consumption expert at Circana, suggested that the promotional limitations have played a significant role in this trend.
In contrast, food product prices have risen slightly by 0.2%. This slight increase is influenced by the recent annual negotiations where distributors obtained minimal price increases (less than 1%) from manufacturers for national brand products. The intense price competition among major food distributors is also contributing to this phenomenon. With purchasing power still limited, brands are striving to maintain the lowest possible prices to avoid losing their competitive edge, sometimes even by delaying price increases or reducing their margins.
The situation remains volatile, with no assurance that the current trends will persist. Michel-Edouard Leclerc, president of the strategic committee of a leading brand, indicated that the inflation rate in hypermarkets is expected to be around 2%, which is a significant improvement from the sharp increases witnessed during the height of the inflationary crisis.
- In parallel, the dairy sector is experiencing its own set of challenges. Following recent price hikes from major dairy producers, the cost of dairy products has surged, particularly in light of the upcoming Shavuot holiday. Prices for a range of popular items including hard and soft cheeses, yogurts, and delicacies have risen. At the start of May, controlled dairy product prices increased by 4.48%, affecting the overall cost of holiday food baskets.
- Unregulated product prices have also been impacted, with Strauss dairy products rising at an average rate of 1.6% and Terra products by approximately 3.2%. Similarly, Tnuva and Gad Dairy Company have raised their prices by an average of 3.5%, affecting a wide array of dairy items ranging from cheeses to desserts. These increases make this year's holiday at least 10% more expensive than the previous year, despite any sales or promotional efforts that might be announced.
- Gad Dairies has introduced promotions on various products, offering different discounts for marketing chains, while Tnuva is expected to run various promotional formats for its cheese categories. However, with the overall price base higher than previous years, consumers are likely to feel the financial strain regardless of these promotions.
