The grocery bill continues to bite, despite the narrative that inflation is under control. It's a complex issue, and the reasons why prices remain high are multifaceted. Let's delve into this topic and explore the various factors at play.
The Slow-Moving Mountain
One of the key points to understand is that inflation statistics can be deceiving. When we hear that food inflation has 'fallen to 2.8%', it might seem like a positive development. However, this simply means that food prices are rising at a slower rate. It doesn't indicate a decrease in the overall price level. The mountain of rising prices remains, even if the ascent has slowed.
For instance, across the EU, food and non-alcoholic beverages experienced the largest cumulative price increase over the past decade, rising by 33.2% between 2016 and 2025. This is a stark reminder that the damage from the food price shock is far from over. Globally, OECD data shows that food price levels were nearly 46% higher in mid-2025 than in December 2019, a significant increase in just six years.
Wages and the Cost of Living
Another critical factor is the impact of rising wages on the food supply chain. Once energy and supply chain costs stabilised, labour became the new pressure point. Farm workers, factory staff, logistics workers, and checkout clerks all received pay rises. While this is generally a positive development, it means that the cost of food production and distribution has increased, and ultimately, consumers are paying for it.
ECB research highlights that wages in agricultural sectors rose by 6.2% year-on-year in 2022 and above 5% in 2023. In transportation and storage, a vital link in getting food to shelves, wages rose by 4.3% in 2022 and 6.3% in the first three quarters of 2023. These increases in labour costs are significant and outpace food price inflation, according to McKinsey's report.
Upstream Costs and Supply Chain Shocks
The issue doesn't stop there. Upstream costs, such as those for milk, eggs, and cereals, are rising again. These inputs take months to reach supermarket shelves, and the effects are already being felt. Of the 64 food items tracked by Eurostat, all but eight recorded price increases in 2025, with chocolate, frozen fruit, and beef and veal seeing notable hikes.
The World Bank's April 2026 Food Security Update flags a near 46% month-on-month spike in urea, a key fertiliser, driven by energy market disruptions. This highlights the vulnerability of the food supply chain to global events. The ECB has emphasised the 'lagged effects from past price increases in international food commodities' as a reason for elevated food inflation into 2027.
Supermarket Margins and Profiteering
The instinct to blame corporate greed is understandable, but it's not always accurate. A peer-reviewed study found that price markups actually decreased over the period from 2013 to 2022. Meanwhile, McKinsey's report puts average EBIT margins in the European grocery sector at just 2.8%, a figure described as 'a pause rather than a recovery'. This suggests that supermarkets are not profiteering, but they also have little buffer to absorb costs.
Eastern Europe's Struggles
The EU average food inflation figure of around 2.8% might sound manageable, but it's a different story in Eastern Europe. Countries like Hungary, Estonia, Lithuania, and Poland have seen food prices more than double since 2015, according to the Eurostat HICP food index. This is particularly punishing, as food spending accounts for a larger share of household budgets in these regions.
In Romania, households spend roughly 25% of their income on food and non-alcoholic beverages, compared to around 11.5% in Germany. This disparity highlights the impact of rising prices on different parts of the eurozone, even within the same monetary union.
Conclusion: A Complex Web of Factors
In conclusion, the high grocery bill is a result of a complex web of factors. Inflation statistics can be misleading, wages are rising, upstream costs are increasing, and the supply chain is vulnerable to shocks. Supermarkets are not profiteering, but they have limited room to absorb costs. The reality is that food prices remain high, and the impact is felt most acutely in Eastern Europe, where food spending accounts for a larger share of household budgets.
This situation raises deeper questions about the distribution of wealth and the impact of global events on local economies. It's a reminder that the narrative of 'under control' inflation might not be as straightforward as it seems. As an expert, I believe that a comprehensive understanding of these factors is crucial in navigating the challenges of rising food prices and ensuring a more equitable distribution of the costs.
