One area where a struggle is abundantly clear is hikes in ingredient prices. The public’s first taste of this came in October when news broke of a standoff between Tesco and Unilever over household favourite, Marmite. The consumer brands firm froze deliveries to Tesco after the supermarket giant refused to accept comprehensive price rises of roughly 10% for its range of brands. Unilever attributed the increase to the fallen pound, but soon reached a compromise with the supermarket, which saw Marmite and other Unilever brands safely back on the shelves.

Tim Rycroft, corporate affairs director at FDF, explained that larger firms can navigate these obstacles; he said, “Some producers have avoided cost pressure because of long-term arrangements to secure their ingredients, until the end of the year in many cases. However, some, especially small producers, are not in a position to negotiate fixed costs on high volumes, and therefore face these pressures with immediate effect.”

According to Nimisha Raja, founder of Nim’s Fruit Crisps, the fall in sterling nearly scuppered a contract with a large high-street retailer. Raja said, “Just before the pound dropped, I was in negotiations with a high street retailer, and I had already submitted my prices for its three requested lines, two of which were for fresh produce that I would purchase from Europe.

“Suddenly, pineapple rose from 55p a kilo to 75p a kilo for roughly 10 tonnes every month. It made a huge difference and I had to return to the retailer and explain that while I would not pass on the whole price increase, I needed to increase my wholesale price a little to cover myself.

Although Raja hasn’t signed on ‘the dotted line’ for this contract, she is confident it will happen soon, and her buoyancy extends throughout every area of the business. “With issues like these, I think you just have to ride out the storm, what else can you do? I do think it’s a storm, and something that will pass. We will go back to a normal exchange rate, but there’s a lot more uncertainty still to go ,” she explained.

Rosie Ginday, founder of Miss Macaroon, a social enterprise that uses manufacturing macaroons to give the long-term unemployed, ex-offenders and care leavers valuable skills and employment opportunities, has also felt the pinch of rising ingredients prices. However, she views this as an opportunity for her and the team to innovate. She said, “It is a massive challenge for us. We have already seen ingredient prices rise and our biggest clients are not prepared to pay, so we are having to absorb them and look at ways of increasing our efficiency to minimise the impact.

“This means investment in new equipment and improving the way we do things. It does not mean automating the process, our macaroons rely on people having the skills to beautifully craft them. If we sell out on that, we might as well give up on the business,” Ginday said.

Article Here: http://www.themanufacturer.com/articles/uk-food-and-drink-eat-drink-be-merry/

0