Foodservice in firing line as suppliers hike prices

Major food and drink suppliers are putting the squeeze on foodservice customers to absorb soaring commodity costs.

The Grocer has seen letters sent by major suppliers including Heinz, United Biscuits and Tate & Lyle to their foodservice customers over the past three months demanding price increases.

All claimed pressure on production and raw material costs made the hikes unavoidable.

“Raw material costs are driven by weather conditions, which have driven prices on crops upwards,” said Heinz head of sales Chris Brough in one letter. “meat prices have risen due to a combination of high animal feed costs and reduced animal numbers.”

The letter told customers prices would rise across its sauces and condiments, quick-serve meals, frozen products and Amoy lines.

The letter from Tate & Lyle Sugars said the EU faced a refined sugar shortage unless it matched world trading prices, which are 50% to 100% higher than levels paid within the EU.

“Unless EU sugar importers and their customers agree to pay similar prices, an incentive for sugar exporters to supply the EU market no longer exists,” said Andrew Jones, senior VP for sales, marketing and distribution. The company would raise the price of white sugar by 176/t from 3 January, he added.

Meanwhile, UB said it was raising the price of biscuits and snacks by 13% and nuts by 15%.

Several wholesalers told The Grocer that more than half their suppliers had upped prices over the past three months and strongly criticised the hikes.

“I doubt suppliers are taking any of the hit, whereas in almost every category I’m being asked to pay a minimum of 5% more,” one foodservice wholesaler said.

Another accused suppliers of taking unfair advantage of the volatile economic conditions. “There are a few companies trying to make hay from the market situation, offering limited, if any, real justification for their price increases,” said Country Range foodservice trading controller Troy McKee.

“We don’t believe the same price increases are being pushed into retail as they wouldn’t take it.”

Wholesalers would fight the increases, said 3663 commercial director Ian Crawford. “We do not accept increases that come through at face value. We wouldn’t necessarily take them at the time or level they’re going through at.”

Booker catering sales director Ron Hickey, added: “The job of wholesalers is to push back on these price hikes for our customers.”

United Biscuits admitted that it was discussing price increases with customers. Tate & Lyle Sugars confirmed prices to foodservice and retail customers had gone up but refused to say how much. Heinz was not available for comment.

Read more
Foodservice chains ‘neglect meal deals’ (27 November 2010)
DBC lands £25m SSP deliveries contract (2 October 2010)