G. Willi-Food, the Israel-based firm, has warned that the “sharp decrease” in global food prices is likely to hit its margins for the next two quarters.
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The company said on Monday (29 December) that it anticipates its gross margins to have fallen during the fourth quarter if 2008 and the first three months of this year.
Willi Food said it manages its orders months in advance by signing agreements to buy inventory to meet its needs over a give time period.
However, the company claimed that during the past few weeks, the global purchase price of food had fallen, leading to a drop in the selling prices of its products.
President and COO Zwi Williger said: “The recent sharp decrease in the global food prices has left us with inventory that was purchased at prices higher from the current market prices and with backlog of vendor orders with purchase prices that are higher then the current purchase prices. Because we must adjust our selling prices to the market prices and pass these costs onto our customers, our gross margins will be reduced.”
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By GlobalDataWilli Food was unable to quantify the impact on gross margins and said it was in talks with its vendors over reducing the prices it has committed to pay them.
The company also warned that margins could continue to be affected beyond April if global food prices fall further.
