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January 27, 2009 Edition 1

Murray Williams

Supermarket giant Pick n Pay has called an urgent summit with its suppliers in a bid to cut food and grocery costs – some of which continue to rise.

As increasing numbers of cash-strapped shoppers struggle to make ends meet, Pick n Pay chief executive Nick Badminton yesterday said consumers were looking for some respite since the dramatic drop in the fuel price, which usually affects prices across the board.

However, Badminton told The Star that some suppliers continued to raise their prices – a situation he described as “untenable” and which some consumers rightly found “indefensible”.

“We’re worried that there are pressures for the suppliers, but the consumers are expecting a decrease – rightly so – and we sit in the middle,” he said.

“We expect that prices should have started to drop. And, yes, there is much good news,” Badminton said.

“Cooking oil, for example, has decreased in price by 40% in the past six months.”

Cake flour had dropped by 17% and cheese by R20/kg; margarine was “on its way down”; bread and maize had come down a little recently, as had garbage bags and plastic wrapping; and many other prices had stabilised, such as for frozen poultry, which was selling at the same prices as last year.

However, Pick n Pay had now received notice of looming price increases from 30 suppliers. This had forced Badminton to write to every Pick n Pay supplier to urge them to be circumspect about increases.

“Yes, we understand the weakness of the rand. But we now have to ask you to exercise serious restraint,” Badminton said he had told suppliers.

He said the company’s buyers had been asked to be extra vigilant in sourcing the lowest prices and asking suppliers who increased their prices to provide detailed explanations as to why they had to hike prices.

Badminton cited a conversation with a dog food supplier that had served notice of a 62c increase for tinned food.

Badminton said the company had provided a detailed breakdown of its costs. There had been a 6c saving because of the drop in the fuel price, but various other increases in its input costs had totalled 68c – hence the 62c increase.

Cosatu has expressed its anger about food prices. Spokesperson Patrick Craven said food producers last year claimed that fuel was a major component of their costs, and that the rising cost of fuel at that time had forced them to increase prices.

The price of maize rose 25% in the year to last February; fresh milk climbed 21%; cooking oil 22%; cheese 35%; margarine 18%; bread 11%; fruit and vegetables 18%; and red meat 14%.

“But now that this ‘major component’ of their costs has tumbled by more than 60% since September, food manufacturers have not cut their prices proportionately,” he said.

Cosatu said it backed Pick n Pay’s action.

In another move, Badminton said he had called for a summit with the chief executives of Pick n Pay’s biggest suppliers in a bid to “open the issue up for debate”. He added: “We need to see where we can bring prices down.”

One of the biggest recent drop in prices was of paraffin, which was down from R214 for 20 litres to R129 – largely because Pick n Pay had added almost no mark-up.