Bakeries’ costs to rise with wheat prices next year

15 September 2010

15 September 2010 | Lindsay Clark

Bread giant Allied Bakeries has said higher wheat prices will put pressure on its margins next year.

The financial statement, from parent company Associated British Foods (ABF), shows the concern over the global wheat price, which has climbed by nearly 50 per cent in the past three months. Allied Bakeries is the firm behind famous brands including Allinson, Sunblest and Kingsmill bread.

“The [bakery] market has remained very competitive in the second half with high levels of promotional activity, and much higher wheat costs seen in recent weeks will put pressure on margins next year,” the ABF statement said.

Soaring temperatures and forest fires during the summer in Russia, a major wheat exporter, have devastated this year’s crop, prompting the country to ban exports of wheat and other grain. Resulting price rises have already caused food riots in Mozambique, as the population fears staple foods will become unaffordable.

Meanwhile, higher commodity prices were also hitting ABF’s retail businesses, including Primark. “Higher cotton prices and freight costs and the increase in VAT, implemented in Spain in July and planned for the UK in January, will put pressure on margins next year,” the statement said.

Severe flooding in Pakistan this year has driven up cotton prices.

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