The CEO of Kraft Heinz says that consumers will have to go along with to higher prices for food.
According to Miguel Patricio, the head of the international food giant, which makes tomato sauce and baked beans, is raising prices of its products in a number of countries.
He said that inflation was “across the board”, unlike in previous years.
According to the UN World Food Organization, rising costs of ingredients such as cereals and oils have pushed global food prices to a 10-year high.
In its home market of the United States, prices on more than half of its products have been raised by Kraft Heinz, and Patricio admitted that this is being done in other markets as well.
“We are raising prices, where necessary, around the world,” he said.
In many countries, there was a drop in raw material production, ranging from crops to vegetable oils, during the pandemic. Output and delivery of raw materials were limited because of measures imposed to control the spread of the pandemic as well as the resulting illness.
The supply of these products has been unable to keep up with the increased demand with the reopening and recovery of economies – which has resulted in increase in their prices. Manufacturers have also been burdened by rising wages and energy prices.
According to Patricio, a variety of factors are adding onto the rise in food prices.
“Specifically in the UK, with the lack of truck drivers. In [the] US logistic costs also increased substantially, and there’s a shortage of labour in certain areas of the economy.”
Consumers will have to get used to higher food prices, according to Patricio, because the population of the world is growing while the same is not happening with amount of land available to grow food.
“There’s a lot to come in technology to improve farmer effectiveness,” which will be beneficial, in the longer term. .
Patricio believes that companies should not pass on to customers all cost increases. Some of the increased costs would have to be absorbed by businesses.
“I think it’s up to us, and to the industry, and to the other companies to try to minimise these price increases,” he said.
According to Kona Haque, head of research at agricultural commodities firm ED&F Man, big food manufacturers like Kraft Heinz, Nestle, and PepsiCo “will most likely have to pass that cost on to consumers.”
“Whether it’s corn, sugar, coffee, soybeans, palm oil, you name it, all of these basic food commodities have been rising,” she said.
“Poor harvests in Brazil, which is one of the world’s biggest agricultural exporters, drought in Russia, reduced planting in the US and stockpiling in China have combined with more expensive fertiliser, energy and shipping costs to push prices up.”
However, she claimed that all food manufacturers would be impacted and, as a result, would raise prices in similar ways: “because it’s so widespread, everyone will do it, meaning they won’t lose customers.”
PespsiCo announced this week that it is experiencing increasing costs across the board, from transportation to raw ingredients, and that more price hikes are likely at the beginning of next year.
However, in addition to raising costs, the pandemic boosted sales for some Kraft Heinz brands, according to Patricio, because people were staying at home and “cooking far more than they were before.”
(Adapted from BBC.com)