A Slow-burning Crisis as Food Inflation Continues to Build
The Food and Drink Federation is warning that food inflation could reach 9–10% by the end of the year, driven by sustained cost shocks linked to global instability. There will be a lag. It can take 7–12 months for rising input costs to fully feed through to shelf prices. That means many manufacturers are already absorbing higher costs that haven’t yet been recovered. In effect, the inflation consumers see today is only part of the story.
This delayed pass-through is creating a slow but persistent build in pressure across the system. Many categories were already experiencing extreme pressure prior to the latest events in the Middle East. At the same time, calls for government support on energy costs highlight how deeply these pressures are embedded in production. The result is a market where inflation is not spiking suddenly but steadily tightening over time.
Shoppers are adapting quickly and purposefully
Rising grocery bills are already reshaping how consumers behave. UK households are now spending around £119 per week on food and 61% of shoppers say they are cutting back on volume purchased. This isn’t just short-term belt-tightening it’s driving structural shifts in how people shop and what they prioritise.
Key changes include:
- Increased reliance on private label products
- Greater use of loyalty schemes and vouchers
- Switching to discount retailers
- Cutting back on discretionary items like snacks, alcohol and fresh meat
There is also a noticeable shift towards online grocery shopping, with one in five households now ordering digitally. While this helps consumers control spending, it reduces impulse purchases creating additional challenges for branded products. Over time, these behaviours are likely to become embedded, as they were during the COVID-19 pandemic creating new shopping habits.
Manufacturers are caught in a margin squeeze
For food and drink manufacturers, the timing of these shifts is particularly difficult. Costs are rising now, but pricing recovery is delayed, while by the time increases reach shelves, consumer demand may already be weaker. This creates a dual pressure: margin erosion in the short term and volume risk in the medium term.
Passing on cost increases is becoming more complex in a market where shoppers are actively trading down. Holding prices, however, is not sustainable as input costs continue to rise across energy, ingredients and logistics. At the same time, retailer expectations are intensifying, with stronger negotiation on pricing, promotions and value delivery. Manufacturers are effectively being squeezed between rising costs and increasingly cautious customers.
Retailers are holding the line - for now
Across many large retailers the response has been to delay the impact on shoppers wherever possible. Retailers are absorbing costs, driving efficiencies and investing in price perception to remain competitive. This includes expanding private label ranges, increasing promotional activity and focusing heavily on value messaging.
However, their communications also point to growing strain beneath the surface. Retailers are warning about profit pressure, rising energy costs, and ongoing uncertainty linked to supply chains and global events. There is also active contingency planning underway to manage potential disruptions to availability. While prices are being managed carefully today, this position is unlikely to hold indefinitely.
A system under pressure
Taken together, these dynamics reveal a market under sustained and uneven pressure. Inflation is still working its way through the system, consumer behaviour is shifting in response and both manufacturers and retailers are trying to absorb impact at different points in the chain. The risk is not just higher prices, but a more fragile balance between cost, demand and availability.
The coming months will be defined by how these pressures converge. As cost increases reach the shelf, they will meet a consumer base that is already more price-sensitive and less predictable. For the industry, the challenge is no longer whether inflation will rise but how each part of the value chain responds when it does.
Why experience matters when the pressure builds
Periods like this aren’t new, but they are unforgiving. The difference isn’t whether organisations face the pressure, but how clearly and quickly they respond when it hits. In these moments, having an external perspective becomes critical, particularly when internal teams are deep in the day-to-day.
At Sellex, we provide an external perspective that is grounded in lived experience. We have worked in turbulent times over our 25-year history, including other recent disruptive cycles from the COVID-19 pandemic, Brexit referendum and to the inflationary shocks following the Russian invasion of Ukraine. These periods created similar patterns of rising costs, shifting demand and tougher commercial trade-offs and required businesses to make decisions with incomplete information and limited time.
What that means in practice is bringing a clearer view of the bigger picture. Where pressure is likely to land first. How retailers and customers are likely to react. And which decisions will protect value versus simply delaying the impact. It also means being able to challenge constructively, supporting teams to make difficult calls with more confidence, whether that’s around pricing, customer strategy, or where to focus effort.
In volatile conditions, it’s easy to become reactive. The role of Sellex is to cut through that noise, helping businesses stay focused, act earlier, and navigate complexity with greater control when it matters most.
Ready to find out more?
If you are looking for an external perspective to help navigate these challenging times, please contact us.
