Chinese food price deflation is likely to dent retailers’ results and hold back identical sales growth, industry watchers have warned.
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According to official statistics, the price of meat products is down by 8.8%, pork fell 18.9%, vegetables are down 9.3% and cooking oil is down 17.2% year-on-year.
The trend is partly due to the price spike in February last year, when snowstorms across the country pushed up food prices at the same time as the New Year holiday created strong demand.
The decline in prices is also coming from promotions at several leading retailers. Wal-Mart and Carrefour have slashed prices on a range of items in recent months to stimulate slowing sales.
Mavis Hui, analyst with DBS Vickers in Hong Kong, said the lower prices would reduce same-store sales growth at retailers. “When food prices climbed, we saw same-store sales growth in the low teens. Now that’s going to be reversed,” she told just-food.
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By GlobalDataYing Xu, chief financial officer at Wumart, said: “Last year, inflation was quite serious. This year prices on many staple foods have dropped. Cooking oil is down by 50%”
Higher food prices contributed 4-5% of Wumart’s 20% sales growth last year. “This year, it probably won’t contribute.”
“The economic downturn would likely keep pricing power weak through much of the year,” Ken Peng, economist with Citigroup, told just-food.
