The supply chain crisis has intensified, and many food giants announced price increases!

Recently, senior executives of global food giant Kraft Heinz said that they are increasing commodity prices in areas where it is necessary to remind consumers to get used to higher food prices. Driven by various factors such as rising prices of food raw materials, hindered supply chains, high labor costs, and soaring energy prices, global food companies have to raise the prices of their products to resist inflationary pressures.

Before Kraft Heinz, many well-known multinational food companies announced price increases. Nestlé, Unilever, Coca-Cola, Pepsi, etc. all announced plans to increase commodity prices. Nestlé said it expects input costs to rise by about 4% this year, so the company needs to raise prices as soon as possible. Unilever said that the company is facing the biggest pressure to increase costs in 10 years and will increase prices in multiple markets and categories.

It is not difficult to see from these price increase announcements that rising costs of raw materials were the direct cause of product price increases. The monthly food price index released by the Food and Agriculture Organization of the United Nations showed that global food prices have risen to a 10-year high. In September, global food prices rose by 32.8% year-on-year. The "high fever" of grain prices increased the cost pressures on food production companies.

However, the mere fluctuation of food prices was not enough to make these companies touch the sensitive nerve of consumers on "price increase". Pepsi said that in addition to the shortage of raw materials, factors such as labor shortages, reduced availability of air or other commercial transportation, port closures or border restrictions had also adversely affected the supply chain, which might further affect Pepsi's ability to produce and sell products.

At present, the cost pressure faced by food companies does not only come from rising food prices, but the deeper reason lies in the supply chain crisis. Port delays, hard to find a container, transportation delays and insufficient supply caused by global supply chain crises, as well as the resulting shortage of packaging, logistics, energy, etc., and price increases were superimposed with the increase in commodity prices and the shortage of food supply. It has pushed up the production and operating costs of food production companies at all levels, eroding their profit margins, and forced them to offset rising costs through price increases.

In addition, with rising prices and people's expectations of continued inflation in the future, labor shortages may further intensify. In European and American countries, labor shortages have worsened the supply chain crisis. With rising prices, people’s expectations for wages have increased, and the difficulty of recruitment and labor shortages became more severe, which has increased the operating costs of enterprises.

Affected by the epidemic, it will take time for the global supply chain to recover. The international logistics difficulties and energy supply problems may not be alleviated in a short time. The International Monetary Fund warned in its latest World Economic Outlook Report that the upward risk of global inflation has intensified and there are huge uncertainties in the outlook for inflation. The headline inflation rate in the United States and some emerging markets and developing economies has risen rapidly. Under inflationary pressures, more food companies will be unable to support them and announce price increases. If food manufacturers want to stabilize product prices, they have to make a fuss about restoring the supply chain and controlling inflation.

Cr: China Trade News