It is data that makes many people take notice and take notice. For the first time since February 2015, food was cheaper than a year earlier. Consumers paid 0.7 percent less in March. This meant that inflation was even below the inflation rate, as announced by the Federal Statistical Office.

The figures give hope to consumers. Food prices have only known one direction in recent years. They rose: in 2023, food inflation was 12.4 percent, the year before it was 13.4 percent. Now there are signs of a change in trend. How sustainable is the development? Can consumers prepare for supermarket prices to drop significantly again?

Sascha Möhrle, inflation forecaster at the Ifo Institute, does not expect it at first. “Even if price developments have weakened a little, it is very unlikely that food prices will return to the 2020 level.” Since then, food prices have risen more than 30 percent. Möhrle expects prices to rise by an average of 1.3 percent in 2024 and 2 percent next year. Economist Jasmin Gröschl from Allianz Trade also does not believe in falling prices.

In the video above: Important tips: how to manage costs in the supermarket and live healthily

Prices don't automatically drop now

Kai Hudetz, CEO of the IFH retail research institute in Cologne, believes that “the era of dramatic price increases is over.” However: “Energy and logistics costs have increased steadily. The resulting price increases will no longer be reversible.”

This is also demonstrated by data from the market research company GfK. Many people have changed their purchasing behavior due to rising food prices. They bought more private brands and fewer manufacturer brands and went to discount stores more frequently. In 2023, they increased their sales more strongly (10.3 percent) than full-range retailers such as Rewe (6.2 percent).

“Even small price differences cause consumers to change products or even place of purchase. Trade and industry are reacting to this,” says trade expert Hudetz. In view of the enormous competitive pressure and strong concentration on prices, manufacturers and retailers tried to take advantage of even the small potential for cost reduction to gain market share.

Sven Reuters, CEO of the price comparison portal Smhaggle, does not believe in any notable relief. He also expects prices for many products to increase in 2024. He has recently seen reductions, especially in own brands. However, these often go unnoticed and often only amount to a few cents. On the other hand, there have been significant price increases in branded products. At 6.99 euros, detergent from a large company is more than 20 percent more expensive than a year and a half ago. Another manufacturer reduced the contents of an ice cream package. The price remained at 3.99 euros.

Consumers consume less butter, milk and cheese

Germans consume less milk, cheese and butter. Like the previous year, per capita consumption fell last year, according to preliminary figures published on Friday by the Federal Office of Agriculture and Food. According to authorities, the reasons could be the slow decline in prices of milk and dairy products, changing eating habits and increasing sales of plant-based dairy alternatives.

Milk consumption fell almost one percent, to just under 46 kilos per capita. Compared to the previous year, production fell by almost one percent to around 4.2 million tonnes. Per capita cheese consumption also fell, falling 816 grams to 23.8 kilos. Cheese production increased from 2.64 million to 2.66 million tons. Cheese exports reached 1.41 million tons, the highest value since 1992. Less butter, milk fat and fatty dairy products were consumed. Consumption per person fell 1.4 percent to 5.6 kilos. Production rose 1.8 percent to 481,000 tonnes.

The number of dairy cows fell again in 2023. Compared to the previous year, it decreased by 2.5 percent to 3.7 million animals. The number of dairy cow farms is also decreasing. It fell more than four percent, to 50,581. The average milk production per cow per year increased from 8,504 to 8,780 kilos.

Are Rewe, Kaufland, Aldi and Lidl passing on the reductions?

According to the Federal Statistical Office, not all food products have been equally affected by price reductions lately. Sunflower oil, rapeseed oil and similar products (21.7 percent), fresh vegetables (20.1 percent) and dairy products (5.5 percent) became significantly cheaper. In one year, sugar, jam, honey and other confectionery products became more expensive (8.4 percent), as well as fruit (4.2 percent). Olive oil prices rose especially sharply by up to 54.1 percent.

Rewe boss Lionel Souque expects food prices to drop this year. “There is currently no longer inflation in our product ranges in all our markets; weighted prices are actually falling.” Prices for pasta, flour, grated cheese, tomatoes and lettuce leaves have recently fallen in the double-digit percentage range.

Kaufland also says that lower raw material prices are passed on to its customers. Since last year, many items, including coffee and pasta, have seen their prices permanently reduced. The discount store Aldi also highlights it. The company says that they “of course reduce selling prices if purchasing prices go down.” Lidl also says it has recently permanently reduced the price of numerous items. More could be added throughout the year.

Great uncertainty in the evolution of prices.

However, trading companies are cautious with their forecasts, and rightly so. There is great uncertainty about the future evolution of prices. This is also due to the effects of climate change.

For this reason, economist Gröschl expects some products to become more expensive. “In the future we will have to wait for new price increases or shortages of products that are therefore vulnerable to climate changes. For example, if the olive harvest goes wrong due to high temperatures or lack of rainfall.” Among other things, he expects chocolate to become considerably more expensive.

“There will be years when certain products such as avocado, cocoa, coffee, mango, coconut, papaya and banana will become scarcer,” says WWF agriculture expert Michael Berger. More frequent extreme weather conditions increase the risk of crop failure.

“This makes it more difficult for commercial companies to calculate.” According to the PIK climate research institute, rising average temperatures could increase annual food inflation and core inflation by up to 1.18 percentage points between now and 2035.