One of Australia’s supermarket giants estimates that prices have risen by two to three per cent this year due to COVID-induced inflation and the increases are not done yet.
The hits to your wallet keep on coming, as Woolworths reported a slump in profits for the second half of 2021 and warned of further price rises.
CEO Brad Banducci says the company is coming out of its toughest quarter of the pandemic so far, where it battled supply chain and staffing issued caused by the Omicron wave.
The cost of keeping its stores and distribution centres COVID-safe had increased dramatically over the past six months from $55 million to a whopping $239 million, he says.
Now Mr Banducci is warning that external inflation pressures could drive prices up even further.
The latest Australian Bureau of Statistics (ABS) measure of living costs, the Consumer Price Index (CPI), show a rise of 3.5 per cent in the 12 months to December 2021, driven in large part by soaring fuel costs.
“There is pressure there, the pressure is legitimate, it’s not only on the products we sell but across everything that we do,” Mr Banducci says.
“We expect inflationary pressures to continue to intensify due to industry-wide cost increases. It is inevitable that some prices will increase …”
Woolworths is holding off any immediate price hikes in stores and Mr Banducci says it will focus on delivering affordable groceries.
“While COVID-related costs are likely to remain elevated in the third quarter and some costs will persist while COVID remains with us, we expect them to moderate over the course of the half [of 2022],” Mr Banducci says.
Coles also posted reduced profits due to a COVID-safe bill of around $150 million.
CEO Steven Cain told The New Daily that both local and global costs were rising, with higher prices for key transport inputs such as oil putting pressure on profits.
“We have seen further cost price pressure coming through in the early part of this half and we expect that to continue,” Mr Cain said.
Supermarkets are facing intense pressure from suppliers to lift prices.
A recent survey of about 45 suppliers of supermarket goods revealed more than 90 per cent intended to raise their prices by an average of 6.8 per cent in the first half of this year.
So far, the supermarkets have been resisting big increases and as there are only a handful of chains in Australia, Woolworths and Coles hold enormous influence.
“The supermarkets have indicated they’re going to do their very best to maintain lower prices or withhold rising costs,” says Queensland University of Technology Professor Gary Mortimer.
“Strategically, they don’t want to be going out lifting prices … particularly when Australian families have done it tough for some time.”
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