Food inflation figures fail to reflect changing consumer behaviour - Sainsburys CEO

Food inflation figures fail to reflect changing consumer behaviour - Sainsbury's CEO

The chief executive of Sainsbury's has played down the impact of food inflation on the UK's Retail Prices Index, suggesting that government numbers have "overstated" their contribution.

Speaking alongside the retailer's first quarter results today (15 June), Justin King said food was only a "small part of the picture" and that petrol and energy are the "biggest part of the picture".

While King conceded that the Office for National Statistics (ONS) is "mathematically correct", it did not reflect changes in consumer behaviour.

King said the headline figures from the ONS doesn't reflect the "many thousands of products people buy" and is "unadjusted to reflect consumer behaviour".

"One of the things that customers have long since learnt is that you can choose your own level of inflation. If one particular meat is relatively expensive, they [consumers] will switch out of it," said King.

Yesterday, the ONS said that the RPI was up 5.2% over the year, while Consumer Price Index rose 4.5%. It said the largest upward pressure to the change in CPI inflation came from food and non-alcoholic beverages, where prices, overall, rose by 1.3% between April and May this year, but fell by 0.1% in the same two months in 2010.

The ONS said fruit prices were up by 4.7% compared with a 0.4% fall a year ago, while meat prices rose this year, but also fell a year ago "across a variety of items".

King accepted that there is the "likelihood" of some significant commodity cost price pressures to come, particularly if the "well-discussed challenges faced by farmers in the northern hemisphere" continue and result in poorer crop volumes.

However, he said that the situation would "not necessarily" result in higher prices, but that it is "very likely".

Describing the way that consumers are attempting to switch out inflation, King highlighted the success of Sainsbury's Basics private-label range. He said that the line has become number two behind Tesco's Value range, and overtook Asda's Smart Choices to take some 22.3% market share.

King said Sainsbury's private labels have performed well, despite high levels of promotions among brand manufacturers meaning that private-label sales across the market have "ticked down a little". However, he suggested private-label sales will improve as branded manufacturers are forced to either push up prices while maintaining promotional intensity, or reduce promotional intensity.

"As our customers have found, it [private-label] can be a great way to save money without having to compromise on quality," emphasised King.