29 November 2007 | Antony Barton
Buyers for food manufacturers are struggling to find ways to combat the rising costs of ingredients, so are having to pass them on to their customers.
Northern Foods, Premier Foods and Robert Wiseman Dairies (RWD) have all reported recent price rises for their products to offset commodity costs.
An interim statement from Premier Foods said a rise in the price of wheat had led to higher bread prices in September
Northern announced its half-year profits were up 38 per cent on the previous year, but added the price of cereals, dairy, cocoa and fats had risen sharply and material costs would increase by 8 to 10 per cent over the year.
Despite higher milk prices, RWD reported a rise in operating profit from 2.36p a litre of milk to 2.58p. It also still pays a premium to its dedicated suppliers.
Pete Nicholson, milk procurement director at RWD, told SM
it would be "very difficult" to cope with rising milk prices if they increase at the same rate over the next six months. He said passing the costs on to supermarkets is currently the only solution.
"Supermarkets understand but you need to prove to them you're operating efficiently and that you're making every effort to ensure your supply chain is doing so, too. You also have to make sure the profit delivery back to the farmer is at a level that enables them to be sustainable." Data from the Office for National
Statistics reveals food firms are paying almost 9 per cent more for ingredients than this time last year. Various sources attribute this to a rising global population, floods, droughts and the biofuel industry's need for grain.