Food will continue to rise in price: US consumers are advised to get used to it
'12.10.2021'
Nurgul Sultanova-Chetin
Data from the UN Food and Agriculture Organization showed an increase in the cost of products such as cereals and oils. Rising prices have led to a 10-year high in food prices around the world, reports with the BBC.
According to the head of Kraft Heinz, Miguel Patricio, due to the rise in inflation almost everywhere in the world, the company was forced to raise prices in several countries. After the pandemic, food prices will inevitably rise and people will have to get used to spending more on food, Patricio added. Kraft Heinz is one of the largest food manufacturers in the world, known for its Heinz ketchup.
The company has raised prices by more than half of its products in the US domestic market. The head of the company admitted that prices are rising in other countries, where it is necessary.
Manufacturing restrictions
The pandemic has caused a reduction in the production of raw materials. Quarantines and lockdowns around the world have led to restrictions on the production and distribution of finished products.
Prices are rising on rising demand with renewed economic growth, which suppliers are not keeping up with. Higher wages and energy prices have also increased the burden on producers.
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All of this combined makes food more expensive, Patricio said.
“The UK lacks truck drivers... In the US, logistics costs have also risen significantly and there are labor shortages in some areas of the economy, ”he adds.
Get used to rising prices
Patricio believes that buyers should get used to the high prices. The planet's population is growing, but the area of land where food is grown is not. Therefore, it is necessary to improve the efficiency of farms. He added that both buyers and manufacturers will finance the increase in costs.
The head of Heinz believes that all manufacturers should minimize such cost increases.
Kona Hack, head of research at agricultural company ED&F Man, expressed her opinion. In her opinion, large producers will be forced to pass the costs on to consumers. “Whether it's corn, sugar, coffee, soybeans, palm oil, whatever, these staple foods are getting more expensive,” she says.
Factors such as the drought in Russia, the accumulation of stocks in China, and the reduction in crops in the United States have led to an increase in prices. It was also caused by poor harvests in Brazil, which is one of the main exporters of agricultural products.
According to Kona, this will affect all food manufacturers and, therefore, they will all raise prices in about the same way, since everyone will do it, which means that they will not lose customers.
"An impressive rise in prices"
According to the head of Heinz, the pandemic has not only increased costs, but also increased prices. People sitting at home in quarantine cook more than usual, which has led to an increase in demand.
Another major manufacturer, PepsiCo, announced a price hike early next year. The reason was the cost, which has risen for literally everything - from transportation to raw materials.
In the first half of this year, total sales rose 1,6% to $ 13 billion. According to Erin Lash of investment firm Morningstar, “quite impressive compared to the comparable period before the pandemic in 2019,” despite even a slight slowdown.
Kraft Heinz is reorganizing the company - buying up new brands and selling old ones. This narrows the company's area of interest, Lash said. It also increases costs for innovation and marketing, which will support future sales.
Another goal of the company is to reduce the use of plastics... Therefore, additional costs will be spent on updating the product packaging. For example, most of the 650 million bottles of ketchup that the company sells annually are plastic. Still, says Patricio, the firm encourages the purchase of glass bottles, even though they are less convenient - you have to tap the bottom to get the leftover ketchup.
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Reducing disposable ketchup sachets would be a huge plus, but in the pandemic, people were more likely to order food Takeaway... Therefore, the company increased their production by 30%.
“It's good that we did it - now we no longer have a shortage of bags,” says Patricio. However, reducing the amount of plastic in packaging, he said, still remains on Kraft Heinz's list of priorities.
