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Food and drink prices have soared to their highest levels in more than 40 years, pushing UK inflation back to highs seen over the summer, according to the latest figures.
The Office for National Statistics (ONS) reported Consumer Prices Index inflation rose to 10.1% in the year to September following a slight retreat to 9.9% in August.
Soaring energy costs and more expensive food bills were the largest contributing factors to the latest rise in the headline rate.
Food and non-alcoholic beverage prices rose by 14.6% over the past year, up from 13.1% in August, which the ONS said was the highest level since April 1980.
It is the 14th consecutive month that food inflation has climbed higher, moving from –0.6% in July 2021.
The largest drivers in the category in September were bread and cereals, meat products, and milk, cheese and eggs.
ONS director of economic statistics Darren Morgan said: “After last month’s small fall, headline inflation returned to its high seen earlier in the summer.
“The rise was driven by further increases across food, which saw its largest annual rise in over 40 years, while hotel prices also increased after falling this time last year.”
He added that these rises were partially offset by continuing falls in the costs of petrol, with airline prices also falling by more than usual for this time of year and second-hand car prices also rising less steeply than the large increases seen last year.
Fuel prices fell back in September after soaring earlier in the year, with petrol prices down 8.7% per litre on average on the month to 166.5p, while diesel prices fell by 5p to 181.6p per litre.
However, it is still about 25% more expensive than a year ago.
Morgan said: “While still at a historically high rate, the costs facing businesses are beginning to rise more slowly, with crude oil prices actually falling in September.”
Morning update
Rising food prices have helped Nestlé increase organic sales in the first nine months of its financial year by 8.5%.
The rise in organic sales, which reached 9.3% in the third quarter, was driven by a 7.5% hike in prices to reflect “significant cost inflation” and a 1% jump in volumes.
CEO Mark Schneider said the challenging economic environment was “a concern for many people” and was affecting its purchasing power but, he added, the Swiss food giant was adjusting prices “responsibly” to reflect inflation.
“That’s why we aim to keep products affordable and accessible while considering the interests of all our stakeholders,” he said.
Total reported sales in the nine months to the end of September increased 9.2% to CHF 69.1bn (£61.3bn), with a 1.2% contribution from acquisitions and offset by 0.6% by currency headwinds.
By product category, Purina petcare was the largest contributor to organic growth, with continued momentum for premium brands Purina Pro Plan, Purina One and Fancy Feast, as well as veterinary products. Sales in coffee grew at a high single-digit rate, with “positive sales developments” for Nescafé, Starbucks and Nespresso.
Nestlé said it now expected organic sales growth for the year to be around 8%, while the underlying trading operating profit margin is expected to be 17%.
Schneider added: “We remain confident in the strength of our brands, operational execution and underlying category dynamics which position us well for future growth.”
Nestlé also announced it had bolstered its North American coffee business with the acquisition of Seattle’s Best Coffee brand from Starbucks.
The group said the transaction was part of its focus on driving sustained profitable growth in the coffee category and strengthened the Global Coffee Alliance by allowing both companies to focus on their core strengths.
“Our partnership with Starbucks has confirmed Nestlé’s leading position in the dynamic and growing global coffee market,” said David Rennie, head of Nestlé coffee brands. “With the well-known Seattle’s Best Coffee brand, we will continue to build our leadership in coffee by offering consumers more choice for their everyday coffee.”
Just Eat Takeaway has returned to profitability sooner than expected in the third quarter thanks to higher prices and operating efficiencies.
Total gross transaction value (GTV) rose 2% in the quarter to £6.9bn, while orders declined 11% to 235.3 million.
The company said its focus on profitability delivered material improvements to revenue per order, delivery costs per order and overheads and operating expenses.
As a result, the group was adjusted EBITDA positive in Q3, materially ahead of prior guidance at the beginning of the year and on track towards its long-term target margins.
Adjusted EBITDA improved in all segments, including the UK and Ireland despite a “less favourable” market backdrop and a fall in GTV. Within Northern Europe, Germany remained the most important growth driver with year-to-date positive order growth.
In North America, Grubhub’s partnership with Amazon showed “encouraging” early results.
CEO Jitse Groen said: “After two years of significant investment following the merger and the pandemic, I am pleased that Just Eat Takeaway.com has returned to profitability earlier than anticipated.
“Driven by a wide range of initiatives, we continue to improve our operational efficiency whilst simultaneously enhancing the user experience and consumer proposition.
“Although the consumer backdrop will likely be challenging due to the macro-economic environment, Just Eat Takeaway.com owns many leadership positions of significant scale, is well-capitalised through the sale of the iFood stake and is therefore well-positioned to capture profitable future growth.”
Hedge fund Third Point has revealed a new position in Colgate-Palmolive and is pushing for the US CPG giant to sell off its petcare business.
The activist investor said the investment fit “several important criteria in the current investment environment”, including having significant pricing power in inflationary conditions.
“There is meaningful hidden value in the company’s Hill’s Pet Nutrition business, which Third Point believes would command a premium multiple if separated from Colgate’s consumer assets,” the hedge fund said.
“There is a favourable industry backdrop in consumer health, with new entrants via spin-offs and potential for consolidation.”
The FTSE 100 fell back 0.3% to 6917.94pts this morning.
Nestlé shares also slipped 0.2% to CHF 107.46 as markets opened this morning, while Just Eat Takeaway also fell 1% to 1,319p.
Other early fallers included Deliveroo, down 4.5% to 78.7p, Ocado, down 3.3% to 464.2p, Glanbia, down 3.3% to €11.97, and Coca-Cola HBC, down 3.1% to 1,894.5p.
Risers included Science in Sport, up 3.2% to 16p, Hotel Chocolat Group, up 1.3% to 126.7p, McBride, up 1% to 24.2p, and Cranswick, up 0.9% to 2,802p.
Yesterday in the City
The FTSE 100 made a fourth consecutive day of gains and markets steadied followed chancellor Jeremy Hunt’s fiscal interventions. The index rose 0.2% to 6936.74pts.
THG led the risers after SoftBank sold off its shares in the tech group to Qatar Holding and founder Matthew Moulding on Monday. The news was announced after trading hours on Monday evening. Shares in the embattled group rose 9.8% to 50.3p.
Just Eat Takeaway, Glanbia and DS Smith were also among the risers, up 8.1% to 1,331.6p, 3.2% to €12.03 and 3.9% to 285.5p respectively.
Fallers included Virgin Wines UK, down 4% to 48p, Science in Sport, down 3.2% to 15p, and AG Barr, down 1.6% to 454.5p.
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