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August 24, 2011

CHINA: Commodity pressure forces Want Want to raise prices

Chinese food manufacturer Want Want Holdings has upped prices because of soaring raw material costs.

Chinese food manufacturer Want Want Holdings has upped prices due to soaring raw material costs.

In the company’s financial results for the first half of 2011, Taiwan-based Want Want Holdings, which produces a variety of goods including drinks, rice crackers and biscuits, posted a net income of $167m in the first half of 2011, a rise of 3.6%, with sales growing 28% to $1.3bn.

However, it said it faced “tremendous pressure” from surging raw material costs for goods like sugar and plastic packaging.

A spokesman from Want Want said: “Since last year and in the first half of this year, our group faced tremendous pressure from surging costs in raw materials, which significantly affected our profitability.”

Inflation as measured by China’s consumer prices index was 6.5% in July, the fastest pace in three years, although Zhang Liqun, an economist from Chinese government-run Development Research Center, recently said inflation would “fall quickly” as increasing supply reduces the pressure on food prices.

Want Want plans to start marketing activities in the second half of 2011 to try and improve its profit margins.

Meanwhile rival manufacturer Tingyi, China’s biggest maker of packaged food, also reported high material prices had affected its first-half results. Profits from instant noodles, the group’s largest business, fell 2.7% to $106.7m, despite sales increasing by 22.4% to $1.6bn.

Unlike Want Want, Tingyi said it had suspended plans to increase prices as it supported China’s “national policy of price stability”.

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