Soaring food prices kill consumer appetites

Since the Grocery Order was axed two years ago food bills have increased every month, writes Consumer Correspondent PAUL KELLY.

SHOPPERS have seen their grocery bills rise every month for the past two years, inflation figures reveal.

Two years ago this week, Enterprise Minister Micheál Martin axed the Groceries Order, arguing the legislation’s ban on below-cost selling was keeping food prices artificially high.

Since the order was lifted, bills for food, drink and household essentials have increased every month, according to the latest inflation figures.

In 2005, Mr Martin proposed axing the Groceries Order after the Government’s Competition Authority declared consumers were spending as much as €500 more than they would in a market free of price controls.

Central Statistics Office figures show bills for food, drink and household essentials have risen every month since the Groceries Order was finally axed.

Irish food industry spokesman Paul Kelly said the cost of doing business in Ireland as well as increasing global costs of food on world markets had contributed to high bills in the shops.

“There is a high level of competition in the market but the main driver of price is input costs, which is the biggest problem for food companies having to compete against producers in lower-cost countries like the UK,” he said.

Global food prices of basic ingredients like wheat and dairy produce as well as increasing water and waste charges in Ireland have contributed to higher bills, said Mr Kelly, director of IBEC’s Food and Drink Industry Ireland trade group.

Every month the CSO publishes figures showing changes in the prices of goods formerly covered by the old Groceries Order.

The order covered about 75% of food, drink and household essentials. The prices of the remaining 25%, chiefly perishable food like fresh meat and vegetables, are also tracked by the CSO.

Since March 2006, when the order was axed, the cost of food, soft drinks and essentials once covered by the order have risen in cost every month — apart from six occasions when prices fell modestly. In the 12 months to February, costs of these goods in fact rose 8.5% — almost double the general rate of inflation, which is currently 4.8%.

Of the other food, drink and essentials not covered by the order, the cost has risen every month. In the year to February the increase was 2.4%

When the price rises of both classes of food, drink and essentials are added up, CSO figures show overall household bills for groceries have risen every month for two years.

Fine Gael Kerry South senator Paul Coghlan said the end of the order in 2006 had also led to hardships among suppliers.

“The order also contained important provisions to equalise the relationship between very large retailers and their suppliers,” he said.

Invoices were being paid late while suppliers were being forced out of business now controls had gone, the senator said.

The Government’s Competition Authority consumer watchdog is next month expected to publish the first of three reports on the health of Ireland’s grocery market as part of a study looking at whether the axing of the order has worked.

Mr Martin’s department this week insisted the decision to axe the order was the right step for the Irish consumer as well as business.

“The recent increases in basic food items are due primarily to international factors,” said a statement.

“It is most likely had the order not been abolished then the price of food would be higher.”

But the Consumers’ Association of Ireland said the change in the law has not lead to lower prices or greater competition between Ireland’s three big grocery giants.

“The expected benefits have not appeared and the change has not worked,” said CAI chief executive Dermott Jewell.

The CAI has pointed to a reluctance among retailers to launch a price-war for the rising cost of bills, accusing big retailers of being in a “comfort-zone”.

The order was brought in by the Fianna Fáil Government in 1987 under Commerce Minister, Albert Reynolds, to prevent a repeat of a price-war that led to the closure of the H Williams chain.

Dunnes Stores emerged the winner but has been overtaken by British-owned Tesco, the largest grocery supermarket group in Ireland.