Price hikes set for take off

After years of static or falling prices inflation is just around the corner

AFTER a long period of food price stagnation or deflation things look set to change dramatically. Prices will be significantly on the rise soon, say companies in Scotland’s food and drink industry.

While the UK official inflation rate actually slipped back, from 1% to 0.9%, at the last count, much higher inflation rates are expected and food prices are expected to see some of the highest increases.

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Robert Graham (on left), Graham’s the Family Dairy MD: Value of cream up150% in 12 months.

Leaders of some of Scotland’s most important food companies told Scottish Grocer prices of raw materials, energy and packaging were already rising and that it is only a matter of time before price hikes have to be passed on by wholesalers and retailers.

At Graham’s the Family Dairy managing director Robert Graham said prices are being affected by twin forces. After years of low prices at farm level there is no longer a glut of milk, volumes are down significantly.

And added to that the reduction in value of the pound has made some imported materials dearer, although it also provides opportunities to export to the Euro zone at competitive prices.

“We’ve seen the value of cream go up by 150% in the last 12 months,” he said. “Ex-farm prices have had an effect on butter pricing and that’s beginning to come through in retail, slowly.

“We’ve also been seeing some out of stocks in the larger retailers on butter.”

Gordon Allan, director at meat and meat products company Malcolm Allan, said buyers who had been doing business with companies in Ireland were now seeking to buy beef in the UK, which is pushing prices up.

But cattle farmers don’t have stock to meet demand and it takes three years to breed and raise more cattle.

“If the price starts going up, it will continue to go up, we don’t see it stopping,” he said.

At cheese firm Lactalis McLelland managing director Mark Taylor said: “The price that we have to pay for our milk has risen very significantly from a point that was unsustainably low.

“We have chosen to absorb any impact this year but we’ll obviously have to address it with customers early in the new year.”