Spike in supermarket food prices hits shoppers

Supermarket prices are rising rapidly as fuel price hikes and the low dollar force manufacturers to pass cost increases on to the consumer.

The changes are hitting shoppers in the aisles and the prices of some essentials have soared in recent months. The biggest price rises include sugar (up 25 per cent), chicken (up 5 per cent) and cereals (up 3.8 per cent).

Bread prices look likely to rise 7 per cent within months. The increases are across the board and overall, prices are up about 3.4 per cent, according to major supermarket owner Foodstuffs.

It is a major blow for consumers who have already had to contend with hefty rises in their electricity, water and rates bills.

In recent months, supermarkets have been inundated with requests for higher prices from struggling suppliers. In most cases, they have agreed to pass the costs on to the consumer.

Mark Brosnan from Progressive Enterprises, which owns Woolworths and Foodtown, said increases from suppliers are reflected in retail prices.

Rob Schemaly, spokesperson for Foodstuffs Auckland, which includes New World and Pak 'n Save, said price increases are across the board. But they are primarily in packaged goods like biscuits and cereals.

"We've had quite a number of suppliers coming to us with requests for price increases. It's fuelled by the higher costs of operating - manufacturing, labour costs rising and fuel rises," he said.

Mr Brosnan said that's why some costs are shooting up now.

"A lot of suppliers don't rise prices every year. It all comes down to what the cost drivers are."

Many food suppliers were reluctant to discuss details of their price increases, but admitted the pressures of fuel and foreign exchange could force them to raise prices again.

The global sugar price has tripled since January - Chelsea sugar has had to increase its price by 25 per cent. The average 1.5kg sugar packet has risen from $2.00 to $2.50 since January.

"It's certainly one of the biggest cost increases we've ever seen. It's an open market so we are at risk." said John Ellis from Chelsea Sugar.

He said the price increases could continue, especially if petrol costs rise.

The increasing cost of fuel has been a double-hit for the sugar industry. Not only have freight costs increased but most sugar is now being converted into ethanol in an effort to provide a cheaper energy source.

The sugar price rises have affected all products that contain the sweetener, such as biscuits, soft drinks and cereals.

Doug Paulin, spokesperson for Hubbard cereals, said the company has had to pass on increases of 4.4 per cent for some goods - primarily because of sugar prices. The overall Hubbards increase of 3.8 per cent is planned to last one year. But Paulin is unsure if that's attainable.

"We could have been looking at an increase of 6 or 7 per cent. "

The latest casualty of the price hikes is likely to be bread. Laurie Powell of George Western Foods, producers of Tip Top bread, said price hikes of 6 or 7 per cent are a possibility. The reason for this is 75 per cent of all wheat is imported from Australia and Canada, where prices are high.