Ballooning inflation: UK F&B manufacturers shoulder the weight of rising prices

17 Feb 2022 --- In the UK, manufacturers are wary about the risk of passing on the cost increases of rising inflation to consumers. According to the Food & Drink Federation (FDF) all F&B categories are more expensive compared to a year ago and are now at a 10-year high – prices of oils and fats have risen by 15.9%; fruit by 6.9%; and coffee, tea and cocoa by 4.9%.

FDF details that producers are now scrambling to counter this greater efficiency by forward buying and using hedging arrangements to protect against currency shifts.

“Food and drink manufacturers are working hard to keep prices down but are being hit hard by rising energy, ingredient and logistics costs, which for the moment show no signs of abating, alongside dealing with acute labor shortages,” remarks FDF chief executive Karen Betts.

“Today’s continuing rise in the price of everyday food and drink is worrying – particularly for lower income households,” she stresses.

The current food and non-alcoholic drink price rise of 4.3% is the largest in nearly 10 years.

“It's becoming increasingly difficult for companies – large and small – to remain competitive and upcoming regulation is compounding the situation. This puts a premium on good collaboration between government and industry to guarantee that planned regulation is successful and does not place unnecessary burdens on businesses at an already challenging time.”

Food and beverage prices hit 10-year high
The current food and non-alcoholic drink price rise of 4.3% is the largest in nearly 10 years.

Annual food and non-alcoholic drink inflation accelerated to 4.3% in January from 4.2% last December. This is the largest increase since September 2013. However, FDF notes that it runs below headline inflation of 5.5%.

In the FDF’s Food Prices Report published in July 2021, it was predicted that additional costs to industry from UK Government regulation will lead to an annual increase of food and drink shopping per household of £160 (US$218). 

That increase will prove even higher at current inflation rates, concedes the organization.

In 2020, FDF revealed that the poorest 10% of UK households spent 14% of their disposable income on food and non-alcoholic beverages, in contrast to 11% for the average UK household and 8% for the richest 10% of households.

By Benjamin Ferrer