With ingredients costs soaring, TraceGains’ Denis Storey looks at the wider inflationary impacts in the market and reveals how the company’s networked ingredients suppliers are reacting to the trends.
Food prices have gone from bad to worse in the UK, and there doesn’t appear to be any end in sight.
According to the latest data from the British Retail Consortium (BRC), while annual inflation ramped up to 5.1% in August 2022, food inflation soared past that at a clip of 9.3% – well above the three-month average of 7.2% and marking its highest pace since August 2008.
What began as supply shortages in China because of Covid lockdowns spiralled well beyond that, aggravated by rising fuel prices, persistent droughts, and war in Eastern Europe. And Brexit has only made things worse. “Mounting cost pressures up and down supply chains meant shop price inflation hit a new high in August. The war in Ukraine, and consequent rise in the price of animal feed, fertiliser, wheat and vegetable oils continued to push up food prices. Fresh food inflation, in particular, surged to its highest level since 2008, and products such as milk, margarine and crisps saw the biggest rises,” explains BRC chief executive Helen Dickinson. “The rise in shop prices is playing into wider UK inflation, which some analysts are predicting could top 18% in 2023. The new Prime Minister will have an opportunity to relieve some of the cost burden bearing down on retailers, like the upcoming increase in business rates, to help retailers do more to help their customers.”
Finally, on 16 August, retail research firm Assosia compared retail prices at Britain’s four largest grocers and found that prices for breakfast staples, for example, have soared over the past 12 months:
- Bread: The price of 800g of Hovis soft medium slices of bread rose from an average of £1.05 to £1.20, a 14% increase.
- Butter: 250g of Lurpak unsalted butter is now £2.50, up from £1.94, a 29% jump.
- Eggs: Six large free-range eggs from the Happy Egg Co now cost £1.97, compared to £1.72 last year, an increase of almost 15%.
- Sausages: A package of eight Richmond Thick Sausages is now £2.26, a rise of 26 pence from 2021, a 13% jump.
- Bacon: The price of 200g of Finnebrogue Artisan Naked bacon slices rose more than 32%, from £2.03 to £2.68.
Unfortunately, the researchers at Nielsen IQ insist that the end to these historical food inflation rates will linger for at least another six months.
Customers sound off
Earlier this year, TraceGains checked in with its customers to see how they’ve coped with this persistent inflationary crisis.
Two-thirds of the customers we spoke to admitted they’ve had to pass on higher prices to consumers over the past two years. And nearly half of them killed off products because of unsustainable price increases.
We also asked how they might change moving forward. Nearly 70% of our customers planned to expand their supplier networks within the next two years. And about 25% of customers suggested they might bring their supplier base closer to home.
However, our customers aren’t the only brands searching for solutions to supply chain madness. Most of the more prominent brands, such as Coca-Cola and Danone, have nudged up prices to offset higher ingredient costs. Others, including Nestlé and PepsiCo, have turned to “shrinkflation,” holding the line on prices while reducing package sizes.
In addition to bumping up the prices on its cereal line, General Mills has returned to the R&D bench, tweaking the recipes of its stable of consumer favourites, including its famous pizza rolls. “In some of our products, we’ve reformulated over 20 times year-to-date,” Jon Nudi, group president, North American retail for General Mills, said in a recent earnings call. “Every time you make an ingredient change, you have to change the formulation, which is obviously a lot of work by our two teams.”
An historic solution
The TraceGains Networked Ingredients Marketplace, coupled with our robust suite of enterprise solutions, lets brands build new supplier networks quickly and formulate at a moment’s notice with live ingredient technical data. The agility and resilience these solutions create are an ideal fit for the unique needs of a changing market.
A Networked Ingredients Marketplace lets buyers, sellers, and co-manufacturers collaborate rapidly in a shared business ecosystem. This marketplace fosters the immediate exchange of relationship and vital ingredient information, including global alerts, while offering a bespoke analysis of everything a brand needs to know.
“As consumers, we feel the pain of supply chain issues each time we walk out of a grocery store,” says TraceGains CEO Gary Nowacki. “This survey sheds light on the problem directly from a CPG brand’s perspective and lets other food and beverage companies know they’re not alone in this fight. Forward-thinking brands have used this unfortunate time as a wake-up call to modernise antiquated operations, and those who already have are much better positioned to mitigate disruptions with as little impact as possible.”
To find out more about the TraceGains Networked Ingredients Marketplace, contact Dan McGlynn on
+44 (0)113 868 1212 or visit www.tracegains.com
