Irish grocery group Musgrave said consumers could soon run out of savings built up when they stayed at home during the pandemic and face a 'perfect storm' of surging energy bills and accelerating inflation driving up living costs.
Musgrave, Ireland's largest wholesale grocery distributor and owner of two of the biggest grocery chains, SuperValu and Centra, has started to see customers shop around for value and swap branded goods for cheaper own-brand versions in the last six to eight weeks, chief executive Noel Keeley (pictured) told Reuters.
"If we look to September, in my view, the perfect storm conditions are coming for the consumer," Keeley said in an interview on the sidelines of the Consumer Goods Forum's Global Summit in Dublin.
"You could have a situation where COVID savings are gone, summer holidays are over and they may have a bill to pay for that. Energy bills then start to come in and they're much more significant than they used to be, kids are going back to school and you could have an interest rates increase as well."
Tesco chief executive Ken Murphy told the same conference on Thursday that it was seeing signs in its Irish stores of the same stress its main British business is experiencing.
Inflation At 40-Year High
Irish inflation accelerated to a near 40-year high of 7.8% in May, with food inflation up 4.5% year-on-year. Keeley, who said a number of suppliers have sought price increases more than once this year, sees little relief in the short to medium term.
Privately-owned Musgrave is "looking at every cost in the business" to absorb as much as possible, which Keeley said includes cutting the number of deliveries to stores and trimming some product ranges where it makes sense.
It is also making sure suppliers "take a share of the pain" when it comes to price negotiations.
Keeley believes the premium end of the grocery market will hold up during the period of high inflation while Musgrave's market leading Frank and Honest coffee brand also continues to grow with no let up in people buying coffee on the go.
However he cautioned that consumer confidence is fragile.
"When there's a lot of talk about recession and challenges in the economy, all consumers tend to pull back, even the ones that perhaps have more disposable income than others," Keeley said.