Ongoing inflation blocks growth in food sector

Inflation remains the main strategic theme in the Dutch food chain. And the end of the price increases is not yet in sight. Higher consumer prices are still not in proportion to the higher costs that many food producers are currently facing. All in all, it is clear that the food sector is facing a historically unprecedented price increase, according to Rabobank.

Even before the war in Ukraine, raw material prices were on the rise, partly due to the strong increase in demand by and after Corona, but also due to logistical disruptions and adverse weather effects on harvests. The impact of the war is adding to this. Compared to the same period last year, the prices of gas, grain and sunflower oil have risen explosively and they are still rising. Add to that price developments in cattle feed, fertilisers, packaging and personnel, and it is clear that the food sector is facing a historically unprecedented rise in costs.

At the beginning of 2022, supermarkets tried to slow down the price increases for consumers. This was often at the expense of suppliers' margins. In the meantime, sentiment at the negotiating table seems to have changed somewhat. If food retailers do not accept price increases, they risk no longer being supplied with certain products. This contributes to the fact that consumer price inflation is currently rising rapidly.

Consumers will start to respond to this. In the supermarket, they will buy more special offers and private labels. In addition, hard discounters will gain market share from full-service supermarkets. Furthermore, the demand for more premium products and services, such as those offered by restaurants and specialist shops, will come under pressure. For the food industry, the bank therefore expects a plus in turnover due to rising prices, but pressure on margins and volumes due to rising costs and a price-conscious consumer.

Rabobank.nl