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MONEY

German consumers warned to expect higher food prices

Groceries in Germany have already shot up in price by more than 16.6 percent compared to a year ago. But industry bosses expect prices to rise further - although they say they are fighting against unreasonable increases from large corporations.

Food in a Leipzig supermarket.
Food in a Leipzig supermarket. Photo: picture alliance/dpa | Hendrik Schmidt

Life in Germany is getting significantly more expensive. As The Local reported this week, German inflation climbed again in August to 7.9 percent, according to the federal statistics agency Destatis. It came after consumer prices fell slightly in June and July. 

Energy prices, which have taken off since the Russian invasion of Ukraine, have had a “substantial impact on the high inflation rate”, Destatis said. Costs for household electricity and fuel rose by 35.6 percent in August 2022 compared to the same month a year ago.

However, food prices are also heavily affected – they have increased by around 16.6 percent, according to initial figures. 

The graph below by Destatis shows changes in consumer prices. 

Source: Destatis

READ ALSO: German inflation rises again as energy costs soar

According to retail giant Rewe, consumers in Germany will have to brace themselves for even higher food prices.

“We are currently seeing new price increases from manufacturers every week,” said Rewe CEO Lionel Souque on Wednesday ahead of a business event in Düsseldorf, reported Germany’s Tagesschau.

These increases are down to rising energy and raw material costs, as well as logistics and staff costs. 

However, Souque said that not every price increase is implemented. 

“We don’t wave through every price increase, but check whether it is reasonable,” he said.

Souque said the retail giant flights back if bosses feel the markups are not justified. Among multinational consumer goods manufacturers in particular, there are some looking to profit from the current price wave, he said.

“We are fighting against that,” the Rewe boss said. “Many multinationals are making more dividend income than they did last year.”

“Many (firms) come and announce price increases of 10 percent, and say Rewe should pass that on to the customer,” Souque reported.

“That’s totally unrealistic.”

He said that the majority of suppliers are behaving reasonably. “But we have a problem with the very large manufacturers who have the power to enforce demands,” he added.

READ ALSO: ‘€10-€15 for groceries’ -How price hikes are hitting consumers in Germany

Competitor Edeka has also warned its suppliers against excessive price demands.

“Food must not become a luxury good,” Edeka CEO Markus Mosa previously said.

Rewe has already announced that it would not pass on all the increases to customers, and would therefore accept an impact on profits.

Change in consumers’ behaviour

Rising inflation also has consequences for consumers’ shopping behaviour.

Customers in Germany have been switching from branded products to supermarkets’ own brands, and they are paying more attention to promotional prices.

There is also trend towards discounters, said Rewe boss Souque. The Rewe subsidiary and discounter Penny, for example, is currently doing better in terms of sales than in the previous year, he said.

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MONEY

German consumer mood slumps further as inflation bites

German consumer confidence remains on a record downward slide as Europe's largest economy faces soaring inflation and an energy crisis heading into winter, a key survey published Wednesday showed.

German consumer mood slumps further as inflation bites

Pollster GfK’s forward-looking barometer fell to minus 42.5 points for October, hitting a record low for the fourth month in a row, following a revised September reading of minus 36.8 points.

“The currently very high inflation rates of almost eight percent are leading to large real income losses among consumers and thus to a significant reduction in purchasing power,” said GfK consumer expert Rolf Buerkl.

“Many households are currently being forced to spend significantly more on energy,” he added.

The leaders of Germany’s 16 states will meet on Wednesday to discuss additional relief measures to help tackle the energy crisis – but without Chancellor Olaf Scholz, who tested positive for Covid-19 earlier this week.

READ ALSO: German state leaders call for more support to help people with rising energy bills 

Inflation in Germany reached 7.9 percent in August, driven by soaring energy costs, with the pace expected to increase further by the end of the
year.

“Consumer morale will only recover noticeably and sustainably if inflation is reduced,” GfK said.

The dismal prediction for October was driven by a record low in income expectations for September.

Germany is expected to go into recession next year, according to the OECD, with Europe’s biggest economy shrinking by 0.7 percent.

Germany has seen a drastic reduction in supplies of Russian gas since the invasion of Ukraine, causing an explosion in prices for the fuel.

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