Grocery prices are likely to fall this year as food retailers react to the rise of discounters and lower oil and raw material prices.
Steep food price inflation propelled the value of the European grocery market to euro 901.5bn in 2008, research house Verdict’s European Grocery Retailers 2009 report showed.
But the plunge in the price of oil and better harvests last year have depressed price inflation, while the impact of the credit crunch and increased shopper focus on value are likely to be reflected by grocers.
The effect of the downturn on food retailers is anticipated to put a brake on mergers and acquisitions, format diversification and international expansion. Sale and leaseback deals are likely to lose their appeal and sales of non-food and organic goods are expected to take a hit.
Verdict European retail analyst and report co-author Daniel Lucht said: “While grocers are to a certain extent insulated against the downturn that hurting the rest of the retail sector, the effects of the credit crunch and onset of global recession will still be felt.”
Privately-owned grocers such as Auchan, Leclerc and Rewe may be in the strongest position to profit from tough conditions. The report’s co-author, Simon Chinn, said: “Being privately owned, such retailers are not under the same kind of financial pressure from investors that publicly listed retailers have to deal with.
“The companies are able to take a more long-term view of investment, which has been a key driver for many of these retailers’ expansion strategies.”