Bitten by inflation, families are spending less at supermarkets

Families are being forced to trim grocery budgets or shift to cheaper products as everyday needs have become progressively more expensive over the past 18 months. 

Inflation has eaten into disposable income with large supermarket chains witnessing a change in consumer behaviour as families try to adjust to the crushing reality. 

The supermarket industry is not normally subject to price sensitivity since people just go around the aisles popping what they need into their trolley. 

But according to a spokesperson for one of the leading supermarket chains, customers have grown more sensitive to pricing over the past months. Opting for anonymity, the spokesperson said customers are giving more value to every euro spent. 

“We have been noticing more price sensitivity among customers and there is a substantial shift in spending patterns towards relatively unknown brands that are also of good quality,” he said. 

The shift towards less popular brands in staple foods enables customers to save on their supermarket bill, he added. 

It is a sentiment shared by others in the industry as consumers try to tap into special offers and point schemes to benefit from discounts. Checking price tags, cutting down on quantities bought and skimping on the number of unnecessary transgressions has become the norm for many. 

A spokesperson for another chain of food shops was more categorical in her assessment. “We have noticed that the average consumer spend has decreased. Consumers are also being prudent on what they spend their money on.” 

She said that across all shops, the company has witnessed higher sales of chicken products as opposed to beef and pork. “Chicken is a cheaper form of protein than beef and pork, and this has resulted in a shift in consumer spending,” the spokesperson said. 

However, she insisted that not everything was negative, pointing towards a decrease in the price of sunflower oil, which is an important component for the catering industry.  

Sunflower oil shot up in price when Russia invaded Ukraine, a major producer, as the world market experienced a sudden scarcity of the product. 

But the war, which has been blamed for the rapid increase in inflation on top of the supply chain problems caused by the COVID-19 pandemic, is not the only contributor. 

“The problem is that there is too much uncertainty and it is not only the result of the Ukraine war but also because of natural disasters that disrupt agriculture cycles and food production,” the spokesperson said. “As importers we are price takers, although we do try to source products from different countries and suppliers to be able to offer consumers the best prices.” 

Figures issued last week by Eurostat, the EU’s statistical agency, show that Malta’s annual inflation measured by the Harmonised Index of Consumer Prices (HICP) stood at 5.6% in July. 

The result put Malta in mid-table among Eurozone countries, slightly above the euro area average of 5.3%. HICP is a common European standard that allows direct comparison of inflation between EU member states. 

However, the comparison with other euro area countries can be misleading since the Maltese government continues to cushion consumers from fuel and energy price increases through generous subsidies. 

A different set of inflation statistics issued by the National Statistics Office last week give a clearer picture of why Maltese consumers are still feeling the pinch despite stability in the prices of fuel and energy. 

The Retail Price Index (RPI) is a domestic measurement used as a benchmark to calculate the cost of living wage increase, among other things. 

According to the RPI, prices in July increased by 4.7%, down from 5.4% in June. This was the lowest annual rate since March last year. 

But the index showed that the highest annual inflation rates were registered in housing (+8.9%) and food (+8.8%). On the flipside, the lowest annual inflation rate was registered in clothing and footwear (-2.2%) and water, electricity, gas and fuels that saw no increase as a result of subsidised price stability. 

Food remains on a persistent upward trajectory and is now hitting pockets hard. 

In its outlook on the economy published last week, the Central Bank of Malta said price pressures will remain “highly persistent” with inflation expected to remain elevated during most of the forecast horizon. 

And confirming the impact price increases have had on disposable income, the CBM is forecasting that in the short term, inflation “is likely to lead to slower growth in private consumption”. 

The Bank also said the high inflation will cause pressure for wages to rise, adversely impacting businesses’ profitability in the medium term.