This development is exacerbated by poor weather conditions impacting harvests, says GlobalData.
Thomas Brereton, Retail Analyst at GlobalData, commented, “Despite overall retail inflation falling 0.3 percentage points from 2017 to 1.6 percent in 2018, food & grocery inflation will remain significantly higher and down only 0.1 percentage points to 2.7 percent over the same period. The arrival of the sugar tax in April was particularly influential in impeding any inflation decline, driving soft drinks inflation to 3.5 percent in Q2 2018 – up 2.3 percentage points on Q2 2017.’’
Furthermore, wetter and warmer weather from the ‘La Nina’ effect across the US and South America will see poor harvests in coffee, grains and cocoa, significantly affecting the bakery & cereals and hot drinks sectors.
Brereton added, ‘’Food and grocery will continue to gain share of the overall retail market through to 2023, increasing its share by 1.0 percentage points to 44.8 percent as a result of higher inflation than in other sectors. This will force consumers to spend more on food essentials where total food and grocery expenditure is forecast to increase by 13.1 percent (£19.1bn) from 2018 – 2023.’’