There is a lot of noise around about grocery prices, with the retailers being called in to a special forum to discuss the issue and the Opposition demanding action. There are issues here to be discussed, though by far the most significant reason for the high prices that consumers are facing is the sharp rise in costs which producers and retailers have faced.
The rise in wholesale energy and commodity prices has abated in recent months, but in many cases prices remain higher than pre-Covid times. Meanwhile, the general rise in costs that this has kicked off has affected all businesses, including food producers, wholesalers and retailers.
This does not mean unjustified rises in prices – so-called “greedflation” – is not a factor in some cases. A recent study by economists at Allianz estimated some 10 per cent of the rise in grocery prices across Europe over the past year is not explained by higher costs and may thus be due to companies trying to cash in under cover of a generally high inflation rate. But the remaining 90 per cent, it found, did reflect higher costs. And part of the problem for Irish consumers is that prices here were already high by EU standards.
So it is perhaps no harm if the Government turns up the heat under retailers and the wider industry a bit. Minister of State Neale Richmond has convened the Retail Forum of industry players. But in a market controlled by big retailers, in turn supplied by major international wholesalers, what can the Government realistically do?
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Talk of a return to some kind of control on grocery prices looks like a non-runner and could damage supply chains. The Irish grocery market has been made more competitive over recent years by the entry of low-cost operators and the response of domestic players. The policy goal is to make sure the market operates as it should. And so we must hope that as inflation eases and commodity prices fall further, consumers will benefit. If there are signs of anti-competitive practices, then the Competition and Consumer Protection Commission needs to step in. But in the case of rip-off behaviour, consumers shopping elsewhere is likely to be more powerful.
A political difficulty in all this is demonstrated by the recent row over the fall in the price of milk and butter, greeted by shoppers, but objected to by farmers. The agri-food regulator, due to be established under new legislation, is set to monitor how this supply chain works. But with costs rising, someone along the line gets squeezed.
The underlying problem is that, even though general inflation is falling, it remains high in some areas, as does the actual level of prices. Grocery prices may start to fall later this year and into 2024 if commodity prices continue to drop but – like energy costs – this is all going to take some time. The lingering impact of high inflation will thus remain high on the political agenda.