This is what you can do to help mitigate the impact
A number of our suppliers are warning us about a raft of incoming price increases, which will impact you and make already difficult trading conditions even harder. The key driver of the price rises is an increase in worldwide demand combined with a drop in supply. There are a number of reasons for this.
A perfect summer storm
The past two years have been a rollercoaster: first the uncertainty around Brexit and the introduction of new processes and paperwork that increased costs and delays on imported goods, including food. Then the pandemic hit hard, shutting down businesses and putting additional pressure on supply chains. Combine this with a 25% increase in the cost of crude oil since the start of the year, resulting in much higher diesel prices and distribution costs, an increasing demand from hospitality venues as economies open up after lockdowns, and poor harvests, and it’s clear why food and commodity prices are increasing substantially.
The latest edition of the CGA Prestige Foodservice Price Index revealed month-on-month inflation in seven of its ten categories, reaching the highest point since January 2015.
For example, the cost of plastics used in the production of milk cartons has increased by nearly 45% in one month alone. Shrink wrap has increased by £800 per tonne and plastic granules by £575 per tonne. Oils used in the production of spreads have increased by up to 40% YoY and globally, fruit growers are experiencing poor harvests with orange production down 10%, apples by 15% and cranberries by 20% – all pushing up the price of juices.
Many UK growers are struggling to recruit pickers for their crops, pushing up the cost of UK-grown fruit and vegetables by around 3% across the board.
The latest Foodservice Price Index predicts that these inflationary pressures on food and commodities are likely to intensify over the summer. We are also expecting the price of metal to increase, impacting the cost of furniture, aerosols and so on. Watch out for energy price rises and particularly electricity; energy providers are looking to recoup some of their losses incurred during lockdown by significantly increasing standing charges and unit prices – talk to us if you would like us to carry out a free energy health check for you.
Then there are the supply chain issues. Added bureaucracy at ports, issues with shipping and a real recruitment crisis in finding qualified HGV drivers to keep supply chains flowing will mean that produce is in high demand.
Positive actions to mitigate price and supply issues
All the indicators are that the supply challenge will start to settle once we settle into the new ways of working but this could take a few months. However, food and commodity prices are not expected to fall in the near future. This is why it is important to have an open and honest relationship with your suppliers so that everyone can plan ahead to mitigate the impact of price and supply shortages.
There are options to pivot and simplify your offer to deal with supply levels. Here are a few keys actions that you can take immediately:
- Try, where possible, to place an order on Day 1 to be delivered on Day 3 – this is more likely to be fulfilled than requesting an order for Day 2.
- Where possible, maintain minimum stock levels in your business to cover for any delays in supply.
- Be mindful of stockpiling goods, in particular those with a shorter shelf life, as this can contribute to supply issues and increase waste.
- Be prepared to be flexible with your menu choices as alternative products will be available at a lower price.
- If you can, place your orders as early as possible in the day. These orders are more likely to be fulfilled than those placed later in the day.
Be transparent: Be adaptable: Be flexible
A reminder that the best way for us to know how to help you is by talking to us. This helps us to forecast what you will need and ensure that products are available when you need them. We maintain our pledge to always keep you informed and pass on relevant information as soon as we are informed by our suppliers.
Part of the strength behind My Purchasing Partner is our strong relationships with our suppliers that have been formed by being completely transparent and by working towards common goals – delivering the best quality products at the best price. We have worked hard with our supply base to put plans in place to manage supply, mitigating price moves or product shortages.
We are here to help you
We urge you to reach out to our team so we can share solutions that are relevant to your business. We’re all in this together, and the My Purchasing Partner team will do all they can to help. Contact us on 01234 841 889 today.
We look forward to working closely with you in the future
Ray and the MPP team.
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