The baking industry has found it harder to pass on price increases caused by soaring commodity prices compared to other sectors of the food industry, because consumers are more aware of the retail price of bakery products.
This is one of the findings from a new report from research company Rabobank, called Challenging Times in Processed Food - Dealing with Agricultural Price Inflation.
According to the report, food processors saw their cost base rise by 6% in 2007 and 16% in 2008 (until October), due to the sharp increases in agricultural commodity and energy prices. However, while some parts of the food industry were able to pass on price increases to the multiples, which in turn increased retail prices, food manufacturers producing staples such as bread, found it harder to get price rises through. This was because supermarkets were reluctant to raise the price of products that are well-known to consumers for fear of being perceived as expensive.
Bakery products also suffered disproportionately from the rise in commodity prices, because flour makes up such a large percentage of the finished product. said the report.ZZ