The escalating cost of oil is pressurising fresh produce growers’ and importers’ margins - and retailer pricing strategies are squeezing them further, according to importer Wellpak.
Crude oil prices have risen in the past year to levels not seen since the early 1980s.
This week the price of a barrel hit $50 in London. The increases are having a knock-on effect on air freight costs.
Adam Wakeley, Wellpak UK sales and marketing director, said: “A significant percentage of our produce is air-freighted through Amsterdam and London, with rates calculated per kilo plus a fuel surcharge directly related to oil prices.
“Airlines are now demanding a surcharge of approximately
37.5c/kg, up from 10c/kg, a rise of 275%.
“The overall effect on freight costs for a kilo of produce is 20-25%. As freight makes up approximately 60-65% of the total cost, it equates to a final increase of about 15-20%.”
Wakeley said that in the past retailers have been reluctant to move prices over the 99p price point for smaller pre-packs.
“Static pricing to customers over the last three years, despite more normal inflationary increases, has had an overall effect of devaluation which has been absorbed by the growers and importers,” he said.
One option, he said, would be for supermarkets to increase pack sizes and price them beyond the 99p mark.
However, a spokesman for Asda said rising fuel costs had yet to have an impact on the fresh produce market.
“We are working closely with our clients and if fuel prices really do start to have a huge impact, then we will try to minimise that in terms of trying not to let that cost pass on to customers. However, at the moment it hasn’t even got to be an issue.”
Wellpak is a primary importer of African and South American produce such as mange tout, sugar snaps and baby corn.
David Shapley
Crude oil prices have risen in the past year to levels not seen since the early 1980s.
This week the price of a barrel hit $50 in London. The increases are having a knock-on effect on air freight costs.
Adam Wakeley, Wellpak UK sales and marketing director, said: “A significant percentage of our produce is air-freighted through Amsterdam and London, with rates calculated per kilo plus a fuel surcharge directly related to oil prices.
“Airlines are now demanding a surcharge of approximately
37.5c/kg, up from 10c/kg, a rise of 275%.
“The overall effect on freight costs for a kilo of produce is 20-25%. As freight makes up approximately 60-65% of the total cost, it equates to a final increase of about 15-20%.”
Wakeley said that in the past retailers have been reluctant to move prices over the 99p price point for smaller pre-packs.
“Static pricing to customers over the last three years, despite more normal inflationary increases, has had an overall effect of devaluation which has been absorbed by the growers and importers,” he said.
One option, he said, would be for supermarkets to increase pack sizes and price them beyond the 99p mark.
However, a spokesman for Asda said rising fuel costs had yet to have an impact on the fresh produce market.
“We are working closely with our clients and if fuel prices really do start to have a huge impact, then we will try to minimise that in terms of trying not to let that cost pass on to customers. However, at the moment it hasn’t even got to be an issue.”
Wellpak is a primary importer of African and South American produce such as mange tout, sugar snaps and baby corn.
David Shapley
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