The new boss of the Co-op has warned that supply disruption continues to be a “huge challenge” amid shortages of broccoli, lettuce and sunflower oil on the retailer’s shelves.
Interim chief executive officer Shirine Khoury-Haq, who will permanently replace Steve Murrells in the top job next month, told the PA news agency that “price rises are a given” as higher supply costs add to an array of inflationary pressures.
Allan Leighton, chairman of the group, added that inflation was currently “in the ballpark of 4% to 5%” as the retailer committed to pumping money into keeping key items affordable amid the cost-of-living crisis.
The company said it had invested £18 million in price reductions over the past year and will hold the price of around 1,000 popular products.
Bosses said the business also saw significant cost increases away from its retail business, with inflation in coffin materials affecting its funeral arm.
Ms Khoury-Haq said the business has to be prepared for “further volatility” and be well-positioned to react to further supply issues.
“These issues are not going to go away any time and it is very multi-faceted so we need to work hard to protect our customers and suppliers,” she said.
“The supply side of things is still a huge challenge globally.
“For example, flooding in Spain has impacted green vegetables like broccoli and lettuce so we have to switch those out in some products.
“Similarly, the situation in Ukraine has impacted sunflower oil and that is being replaced by rapeseed oil, so we recognise that things are still changing all the time.”
It came as the historic business reported a plunge in profits and widening debts after the supply crisis in the second half of 2021 led to increased costs.
The Co-op said pre-tax profits dropped £57 million last year from £70 million in 2020, after revenues declined to £10.2 billion for the year from £10.5 billion a year earlier, as more people returned to pre-pandemic habits.
It also revealed that its net debt widened to £920 million for the year from £550 million in 2020, due to higher spending on stock amid supply disruption and increased investment.
However, the company added that it has already “significant reduced” its debts this year.
Mr Leighton added: “The past year has been a challenging one for our Co-op, but we continued as planned with our investment strategy to strengthen our Co-op’s future state.
“I would like to thank our colleagues across the business whose passion and support continues to inspire and drive us forwards.
“We would all like to thank Steve Murrells for his outstanding contribution to our Co-op over the past 10 years and congratulate Shirine Khoury-Haq on her appointment.
“The economic headwinds look stark and will be tricky to navigate but through our continued planned strategic investments our Co-op is well placed to ride out the storm and prosper beyond.”