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Worse to come for food price rises: Food and Drink Federation

Linda Stewart — Mon, 04 Jul 2022 09:58:35 +0000

“Relentless” increases in the price of food may not hit their peak until next year, an industry group has warned.

The Food and Drink Federation, which represents UK food and drink makers, said it usually takes 7-12 months for producers’ costs to reach shop shelves.

Russia’s invasion of Ukraine has accelerated manufacturing costs such as energy and fertilizer.

The federation’s boss, Karen Betts, warned prices would “absolutely” get worse before they get better.

Food and drink price inflation rose to 8.7% in the year to May, according to the Office for National Statistics.

“I think the peak could well be into next year and that prices could well rise some way above 10%,” Ms Betts said.

Other groups, such as the Institute of Grocery Distribution, which provides analysis to major grocers, predict that prices could rise by as much as 15% as household staples such as bread, meat, dairy, fruit and vegetables become more expensive.

The UK’s overall inflation rate hit its highest level for 40 years in May, as the costs of energy, fuel and food continued to climb.

People struggling with the rising cost of living are already cutting back on groceries or even skipping meals, according to a BBC survey of UK households.

Ms Betts said that food and drink manufacturers had already seen costs rise during the pandemic due to supply and labour shortages – but the Ukraine war has worsened the situation.

“The manufacturers that I speak to are saying that at the moment all their input costs are rising, so that’s everything from ingredients to raw materials, energy, labour and they can’t see an end to that,” she said.

Both Russia and Ukraine are major suppliers of fertilizer, while Ukraine – known as the “breadbasket of Europe” – produces significant amounts of wheat, corn and sunflower oil.

But the conflict is disrupting the supply of these goods, driving up prices on international markets.

Meanwhile sanctions against Russia – a major oil and gas producer – have further pushed up global energy prices, hitting businesses and consumers alike.

Ms Betts said there was “usually a seven-to-12 month time lag in the prices that food manufacturers pay before those price rises are felt on shop shelves”.

“So, if it is costing more to plant and grow wheat or sunflowers for sunflower oil now then those price rises are going to take 12 months, perhaps longer to make their way into food prices in the UK,” she said.

The UK’s overall inflation rate hit 9.1% in May and the Bank of England predicts it could reach 11% this year.

One of the biggest concerns is that household energy bills are likely rise further in October, when the energy regulator Ofgem is expected to lift the cap on gas and electricity prices.

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Retail groups call for delay in new unhealthy food regulations

Linda Stewart — Mon, 15 Nov 2021 16:39:17 +0000

Business groups have called for clarity from the government over new regulations on foods containing high levels of fat, salt and sugar (HFSS).

The groups, which include the Association of Convenience Stores (ACS), the British Retail Consortium (BRC) and the Food and Drink Federation (FDF), say the rules are so unclear that they want a delay in their implementation from October next year to April 2023.

James Lowman, chief executive of the Association of Convenience Stores said: “We are committed to working with the Government to ensure that retailers comply with the new regulations when they come into force, but the clock is ticking toward the implementation date and we’re no closer to having a clear set of regulations and guidance that retailers can follow.

“These regulations will force retailers into making huge changes to the way that their stores are laid out, as well as almost starting from scratch on the offers that they can provide to customers.

“With so many unanswered questions, the only sensible option is to delay the introduction of the rules to at least Spring 2023 to allow everyone to prepare.”

The groups query how businesses can accurately calculate the nutritional profile of their products; who is responsible for how products are promoted online; and whether retailers can promote HFSS products alongside non-food items – eg a newspaper and a drink at a set price.

Andrew Opie, director of food and sustainability at the British Retail Consortium, said: “Retailers are fully committed to working constructively with government to tackle obesity and help consumers lead healthier lifestyles.

“They have led the way, reformulating own-brand products, promoting healthier options and working with local communities to highlight the benefits of eating well.

“However, with less than 12 months to go until the new regulations come into force, retailers are still waiting for clarity on the detail of the regulations and accompanying guidance.

“Without this, they cannot start to carry out the required work to bring stores and websites to compliance, which will involve making major changes to the way stores are laid out and the promotions they can offer customers.

“The government has already acknowledged that businesses need at least 12 months to prepare and moving the implementation date to Spring 2023 would give an appropriate timeframe for retailers to work towards.”

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GB food manufacturers reduce sales to NI

Linda Stewart — Wed, 27 Oct 2021 08:28:27 +0000

GB food manufacturers have significantly reduced sales to Northern Ireland as a result of the Protocol, according to a survey by the Food and Drink Federation.

The industry group surveyed 83 members between 4 and 19 October, and just under half the respondents were large businesses with more than 250 employees.

Among those, large business sales volumes to Northern Ireland were down by an average of 10% this year, while some smaller businesses reported larger drops in sales.

The FDF said that large businesses make up the majority of the volume of products sold to Northern Ireland from GB.

Across all businesses in the survey, sales to Northern Ireland were down by 13% on average.

Food products arriving into Northern Ireland from GB face a range of new checks and controls, but not all those checks are being applied due to grace periods.

The FDF survey suggests that if the grace periods ended without new arrangements then sales volumes from GB would fall further, by up to a third.

The respondents suggested that the biggest negative impact would be on raw materials and ingredients.

However, anecdotal evidence suggests that local producers in Northern Ireland have been able to increase sales to customers like supermarkets, particularly when it comes to fresh processed meat products like sausage and burgers.

A report by RTE says the volume of container and trailer traffic between Great Britain and Dublin Port was down 21.2% in the first nine months of this year, as a result of the impact of Brexit border controls since January.

Containers have also been reported as being less full than they were pre-Brexit. However, traffic to and from Continental ports increased by 36.3% in the same nine months.

Dublin Port Chief Executive, Eamon O’Reilly, said the only positive thing since Brexit is that much feared delays to traffic had not materialised.

He also said the “dislocation” of traffic ports in Northern Ireland would be a “permanent feature” and a reversal of what happened when the Single European Market came into being 30 years ago

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Marmite and PG Tips maker Unilever warns of price rises

Linda Stewart — Thu, 21 Oct 2021 09:51:32 +0000

Consumer giant Unilever has warned it plans to raise prices to cope with “elevated levels” of cost inflation which it expects to continue next year.

The company that owns brands such as Marmite, PG Tips and Dove says it has already taken “appropriate pricing action” which will continue across its global operations and within each of its product divisions.

The company reported a 2.5% rise in sales for the third quarter of 2021. Growth was supported by a 4.1% increase in prices while the volume of goods sold fell by 1.5%.

The UK consumer prices index (CPI) measure of inflation slowed to 3.1% in the year to September, according to the Office for National Statistics. However, inflation is expected to accelerate in the coming months due to a rise in energy costs and continuing disruption to UK and global supply chains.

Unilever’s chief financial officer Graeme Pitkethly said: “We expect inflation to be higher next year than this year.”

Unilever sells to businesses such as retailers, supermarkets and wholesalers who will be considering whether or not to pass on higher costs to shoppers.

But Danni Hewson, financial analyst at AJ Bell, said Unilever was facing a “balancing act of not increasing prices so much that its products are no longer competitive”.

“It is a real test of the strength of the company’s brands,” she said. “After all, will we really stick with branded soap at a materially higher price when there’s an unbranded alternative sitting next to it on the shelf which is an order of magnitude cheaper?

“If enough consumers decide they can put up with a cheaper alternative then it would become a big problem for Unilever.”

Unilever’s brands include Simple skin care, Sure deodorant and Vaseline. It also produces Ben & Jerry’s ice cream, Cornetto, Hellmann’s mayonnaise and Knorr stocks.

Earlier this week, the boss of the Food & Drink Federation warned that the hospitality industry, which includes restaurants and pubs, was seeing “terrifying” price inflation of between 14% and 18%.

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Food and drink industry warns MPs of ‘terrifying’ price rises

Linda Stewart — Tue, 19 Oct 2021 15:58:19 +0000

Food and drink firms are seeing “terrifying” price rises , according to sector trade body, the Food and Drink Federation.

The industry has warned MPs of knock-on effects for consumers.

Food and Drink Federation boss Ian Wright told MPs that inflation is running at between 14%-18% for hospitality firms, the BBC reports.

The price rises for food firms’ ingredients would lead to consumer price rises, he said, describing the situation as concerning. The UK’s rate of inflation was 3.2% in August and is expected to rise further.

Bank of England governor Andrew Bailey recently warned it would have to act, and suggested that UK interest rates may soon rise from the historic low of 0.1%.

Mr Wright told MPs on the Business, Energy and Industrial Strategy select committee: “Inflation is a bigger scourge than anything else because it discriminates against the poor.”

The Office for National Statistics will publish the latest inflation figures for September on Wednesday. It is expected to rise further above the Bank of England’s target of 2% for longer than previously thought.

Baked in

Make UK, the manufacturers’ organisation, said that inflation was becoming “baked in” among its members.

Stephen Phipson, chief executive at Make UK, told MPs that while there was a welcome rise in demand, many manufacturers are looking at 30% to 40% average increases in material costs.

“When people are able to get hold of materials they are passing those costs on which does imply to us that inflation is more or less baked in at this stage now,” he said.

“This is not a transitory inflationary demand – we are seeing really serious issues now in terms of price increases.”

Surging energy prices

Des Gunewardena, chief executive of high-end restaurant group D&D London, says his business has seen half of its costs rise, including surging energy prices.

He says staff shortages are his “number one issue” and has increased salaries by 10%.

The business has 1,700 employees across the UK and is currently 150 staff short, which he said could lead to a “nightmare situation” in the busier December period.

Table covers have been reduced from 400 on a Friday night at his Quaglino’s restaurant to between 300 and 350 due to staff shortages.

However, he said the restaurants have seen increased customer spending, so he is stocking up on specific champagne brands ahead of time, to pre-empt possible supply problems.

“I think we’ll have a very strong Christmas so there’s no need to panic yet, but I expect further inflation in January when there won’t be the same spending to offset the extra costs”.

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