Food retail inflation could turn negative

Retail food price inflation could turn negative, but should "pop up again and stay at about 0% for the rest of the year", which could make 2010 a challenging year, round table delegates were told.

English Farming and Food Partnerships director Mike Ader said: "Most manufacturers and retailers like movement, because if you are good at what you do, you can get an advantage.

"But we are predicting a slow recovery. We also predict upward pressures on commodity prices in dairy and cereals, but pressure coming down from retailers. A lot of firms put prices up last year, but this year I think the supermarkets will be less receptive."

Elizabeth Shaw chocolate factory boss Malachy McReynolds said that 2009 had been a tough year. "Our Icelandic shareholders decided to fold up their tents and retreat, which caused all kinds of problems." Meanwhile, cocoa prices had doubled, he said: "We had to re-engineer products and resize packs to meet price points." Other delegates also highlighted pressure on margins and payment terms prompted by the Co-op Group's acquisition of Somerfield.

That said, the mood was generally upbeat, according to chairman Paul Wilkinson. "I'm actually feeling a vague sense of self-satisfaction from around the table," he said. "The banking crisis did not materially impact our sector; food and drink was reasonably resilient."

Many shoppers had also "reverted back to their old habits", he claimed, while the major multiples had seen off the threat of the discounters and generally had a strong Christmas.