Retailers, shoppers warned to prepare for ‘intense’ price rises
Australian retailers have been warned to expect significant and continuous price rises from their suppliers for the remainder of the calendar year as the war in Ukraine and fresh lockdowns in China batter the world’s supply chains.
Inflationary pressures have been mounting over the past 12 months as the persistent impacts of the pandemic have driven up the cost of nearly everything, including raw commodities, packaging, pallets and shipping costs.
Lockdowns in China have caused further shipping delays and are threatening to further drive up the cost of goods.Credit:The New York Times
On Wednesday, major dairy and drinks manufacturer Bega warned shareholders its full-year costs related to the pandemic would be higher than initially expected, exceeding $40 million, pointing to delays in China and the Russia-Ukraine war as key reasons.
“There have been increases in input costs associated with the outbreak of war in Ukraine and now also concern on the certainty of deliveries of products destined to the China market scheduled through the port of Shanghai due to lockdowns in that city,” the company said.
Costs have been rising steadily across the market, with Woolworths boss Brad Banducci warning earlier this year that inflation was “live and real” and that price rises of 2 to 3 per cent could start to flow through to the supermarket shelf.
On Wednesday veteran retail analyst Craig Woolford reinforced those warnings, telling The Age and The Sydney Morning Herald he expected prices would consistently rise through the rest of the year.
“We expect [inflation] to sequentially increase, roughly a percentage point of extra inflation coming through over each quarter for the rest of the calendar year,” he said. “This will affect the cost of food and a lot of non-food items like appliances, hardware and sporting goods.”
“Inflation was already building up steam late last calendar year, and now we’ve got additional pressures from the Russia-Ukraine war and the supply chain strains that are happening in China.”
There have been major blockages at Chinese ports in recent weeks as millions of residents in Shanghai have been sent into lockdown, with rising case numbers threatening the country’s strict COVID zero policy.
Similarly, Fred Harrison, who oversees the operation of 70 Ritchies Supa IGA stores in Victoria and NSW, said price hikes were coming through from suppliers thick and fast.
Ritchies chief executive Fred Harrison.Credit:Simon Schluter
“I’ve never seen more price increases in this last six-week period than I have right now,” he said. “It’s been intense, they’re anywhere from 4 per cent through to 10 or 15 per cent across the board.”
These inflationary pressures will weigh heavily on the cost of living for many consumers, an issue that has emerged as a major touchstone in the current election campaign as fuel costs remain high and interest rate hikes are on the horizon.
Harrison agrees with Woolford’s assessment that price rises will continue for the remainder of the year at least, saying that many suppliers are choosing to stagger their increases over a period of time to not shock consumers with a sudden, significant price spike.
It’s unclear how much of an impact new delays in China will have on local retailers who have been dealing with chaos in their supply chains for most of the pandemic, with many of them putting in orders months in advance to ensure sufficient stock levels.
Woolford says he doesn’t expect inflationary pressures to negatively impact retail sales just yet but notes it was “still open for debate” and that spending could decrease if prices continue to rise significantly.
The Market Recap newsletter is a wrap of the day’s trading. Get it each weekday afternoon.
Most Viewed in Business
From our partners
Source: Read Full Article