The impact of the war in Ukraine is making itself felt on supermarket shelves across Europe. The question is – combined with the rising cost of living in general – how apocalyptic might this be for UK shoppers already faced with a potential ‘heat or eat’ dilemma, as well as retailers and suppliers….and what, if anything, can be done to mitigate it?

The UN food agency warned that international food and feed prices could rise by up to 20% because of the conflict in Ukraine. The warning suggested that Ukraine would be unlikely to be able to harvest crops if the war extends for a long time, whilst sanctions will likely also impact on Russian food exports.

Prior to the war, Russia was the world’s largest exporter of wheat; Ukraine the fifth largest. Together, they provided almost a fifth of the world’s barley supply, 14% of wheat, and 4% of maize, making up more than a third of global cereal exports. Grain prices have soared, with wheat price increases reported at up to 40% over the last week.  In practice, this means the price of staple products like bread and pasta will likely rise too. And this at time when pasta prices had already risen sharply because of poor wheat harvests last year. Further cost increases for products reliant on rapeseed and sunflower oils means the price of butters and spreads and mayonnaise could also increase. Moreover, with the cost of animal feed and fertiliser also going up or becoming restricted in its availability, there could be an impact on the price and obtainability of fresh meat, fruit and vegetables.

Recent Kantar data indicated that shoppers had been stocking up on cooking oil because of concerns about potential shortages caused by the war. As a result, and in a way not dissimilar to the restrictions put in place on flour, eggs and toilet roll during the early stages of the pandemic, supermarkets including Tesco, Morrisons and Waitrose have been restricting the number of bottles that can be bought in order to maintain supply.

This situation threatens to merely deepen an already deepening cost of living crisis here. Food prices and energy bills have risen as inflation has reached its highest point for 30 years with the increase in the energy cap in April causing further difficulties. Asda Chairman Lord Rose speaking to the BBC said that he expected food prices to keep rising and stay higher “for quite some time” due to the high cost of raw materials. The Bank of England expects price inflation to hit 8% before too long.

The multiples are trying to play their part to keep food prices down. Morrison’s and Asda have both taken steps in recent weeks, with Morrison’s offering an average 13% price cut on more than 500 goods including eggs, beef and rice and Asda announcing it had “dropped and locked in” prices on some products until the end of the year.

But, at this time retailers and suppliers, more than ever, need to do more to stay ahead of the curve.  They need to conduct research now to understand how shopper and consumer behaviour is going to change in the coming months and then conduct range reviews to determine what needs to be altered in the mix to meet with changes in anticipated consumption behaviours.

We anticipate that as families feel the squeeze on household budgets, they will begin to trade down as they shop. Premium ranges and products are likely to suffer as families gravitate towards cheaper, value ranges and products, though this, if widespread and sustained, will have implications for margins for both retailers and brands. Dependent on price rises, shoppers may gravitate towards store cupboard staples like tinned foods to ensure they can continue to feed their families as cost effectively as possible, and we are likely to see a growth in simple scratch cooking rather than a reliance on potentially expensive ready meals or ingredients. Products that are perceived as treats or luxuries will likely take something of a back seat in the mind of the shopper. There could, of course, also be some move away from the multiples towards the discounters if prices there are perceived to be significantly lower, but we don’t anticipate this being a dramatic shift.

However, challenges are also opportunities. This could be a chance for suppliers and retailers to create an “all in it together” moment with their shoppers. If they can be creative and find a way to make a selection of core products available at a competitive price – perhaps using existing loyalty schemes to stand alongside their established shoppers – this could yet lead to loyalty being sustained and even enhanced once the cost of living returns to something more manageable for most.