Grocery price hikes expected to stop next year, but prices unlikely to fall

While annual inflation in the Netherlands has cooled off to about 1.6 percent, food prices were still about 6.3 percent more expensive in November compared to a year earlier, Statistics Netherlands said two weeks ago. Though the price of energy has already fallen a fair bit this year, grocery bills are more likely to stagnate, a collection of experts told RTL Nieuws on Wednesday.

The price of several products, like fresh milk, has dropped by 11 percent these past 12 months. The broadcaster also noted a 3.7 percent reduction in the price of margarine, while frozen vegetables were 1.6 percent cheaper. Lower prices on wheat have also had an impact. Despite those bright spots, consumers should not expect a significant decrease in supermarket bills in 2024.

"For a basket of 55 products that many consumers often buy, prices are now 8 percent higher than a year ago and even 30 percent higher than two years ago," said GfK market analyst Norman Buysse. These products have largely kept their pricing consistent since the start of the year.

He predicted a possible decline in average prices next year, but would not specify a percentage. While wages are expected to rise further next year, the fall in energy prices and also the cost of raw materials will also affect retail prices.

Still, cocoa and sugar prices are skyrocketing, said Nadia Menkveld. The economist monitors the agricultural and food sector for ABN Amro. Menkveld does not expect a large reduction in supermarket prices, noting that it rarely happens. Livestock feed prices are falling, but also farmers are raising fewer animals, which has kept meat prices higher. Meat that is sold under a certification mark also require farmers to reach standards which are more expensive.

"Some products are now showing a fall in price, but on the other hand, many costs are not falling, such as the mentioned wage costs," Menkveld said. Aside from supermarket staff getting a higher wage, food industry workers will also see their paychecks rise by nearly eight percent next year.

Rini Emonds, a market researcher at Circana, said that the massive price surges from the last few years will not repeat next year. "Before Covid, prices rose on average 2 to 3 percent per year, and you can also assume that for 2024," he told RTL Nieuws. "Supermarkets have recently increased their prices less than their costs have increased, so they have lost some profit, but they do not want to continue doing so."

Emonds said that supermarkets typically spend up to 60 percent of their revenue on purchasing costs, and 10 percent on wages. Transportation and operating costs are also paid out of the remaining 30 percent before they can report a profit.