Food Producers: Highlighting Unique Differences

The food industry is at a pivotal moment. Following a period of high cost inflation and geopolitical turmoil, some manufacturers are beginning to reap the benefits of lower energy and raw material prices. However, this shift brings new challenges. Supermarket buyers are faced with the difficult task of responding to changing margins from producers while grappling with their own rising operational costs. Negotiations over prices this winter are expected to be intense.

Rising Consumer Prices and Their Impact

Since November 2021, consumers have seen a significant rise in supermarket prices, averaging 25%, with spikes of over 40% for certain products. This increase has affected consumer buying behavior. The recent stabilization of supermarket prices suggests a changing dynamic, with a year-on-year food inflation rate dropping from 15% in March to 10% at the end of October.

Dynamics of the Producers' Market 

On the producers' side, there have been significant developments in recent months. Food industry producer prices have fallen by an average of about 4%. This has had varied effects, depending on the product category and sales channels. For instance, private label producers have generally outperformed brand manufacturers in volume, especially in discount channels.

Varied Challenges for Producers 

Producers who proactively passed on raw material cost increases have somewhat benefited from falling raw material prices. However, there are also producers still struggling to pass on cost increases and experiencing margin pressure. Additionally, some raw material prices, such as sugar and cocoa, have recently seen price increases. This has led to a highly varied margin development among food producers.

Negotiations in Focus 

The disparity in performance among producers within the same category will undoubtedly impact negotiations with supermarket buyers. Producers with higher profit margins are expected to be scrutinized by buyers. Conversely, supermarkets are also struggling with higher operational costs and margin pressure. The upcoming negotiation round promises to be intense and complex, with transparency and understanding being crucial on both sides.

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