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October 11, 2021updated 12 Oct 2021 10:12am

Kraft Heinz warns of new norm of higher food prices

The cost of ingredients such as cereals and oils has pushed global food prices to a ten-year high.

US food heavyweight Kraft Heinz has warned consumers that they will have to get used to higher food prices.

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What’s the forecast for the food and grocery industry?

The food and grocery sector thrived during the pandemic, largely due to the shutdown of the food service industry and the sector’s subsequent necessity, panic-induced bulk purchasing, and spending more time at home. The market has grown as a result of inflation. Consumer unwillingness to go out and socialize, and the reopening of several hospitality facilities, helped maintain the demand for groceries, particularly online, in 2021. As consumer behavior changes, we consume more food and drink at home, and inflation increases basket sizes. GlobalData predicts that the sector will continue to hold a higher share than had been predicted prior to the pandemic. This is true despite the fact that the food and grocery sector's share of overall retail will decline from its peak in 2020. This report will discuss market forecasts and key themes in the global food & grocery industry in 2022 and beyond. It covers:
  • Market drivers and inhibitors
  • Five-year forecasts and the impact of COVID-19
  • The performance of the online channel versus offline
  • Major trends in the market including rapid delivery, ambient retailing, supply chain disruption, and inflation
Assess developments within this sector to help your business thrive in 2022 and beyond.
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The baked-beans, ketchup and mayonnaise manufacturer is the latest company in the sector to make a pronouncement on prices as a result of supply chain and raw material inflation. The cost of ingredients such as cereals and oils has pushed global food prices to a ten-year high, according to the UN Food and Agriculture Organisation (FAO).

Speaking to UK broadcaster the BBC, Kraft Heinz chief executive Miguel Patricio said the company was putting up prices in several countries, including its home market – where 50% of its products have seen a price hike.

“We are raising prices, where necessary, around the world,” he said.

Patricio told the BBC a broad range of factors are contributing to the rising cost of food.

“Specifically in the UK, with the lack of truck drivers. In [the] US, logistic costs also increased substantially, and there’s a shortage of labour in certain areas of the economy,” he said.

Patricio said consumers will need to get used to higher food prices given the world’s population is rising whilst the amount of land on which to grow food is not.

But he said firms would have to absorb some of the rise in costs.

“I think it’s up to us, and to the industry, and to the other companies to try to minimise these price increases,” he said.

Last week, another US food giant,  PepsiCo, warned it was also facing rising costs on everything from transport to raw ingredients and said that further price increases were likely at the start of next year.

But its CEO, Ramon Laguarta, suggested consumers today are more prepared to absorb price increases.

Speaking to analysts, he said: “What we’re seeing across the world is much lower elasticity on the pricing that we’ve seen historically, and that applies to developing markets, western Europe, and the US.”

On Friday (8 October), it was revealed the FAO Food Price Index (FFPI) averaged 130.0 points in September, up 1.2% from August and 32.8% higher than in September 2020. Tightening supply and “robust” demand for staples such as wheat and palm oil were behind the rise, the FAO said.

The FFPI is a measure of the monthly change in international prices of a basket of food commodities. The last time the index hit a similar level was in 2011 when it reached 131.9.

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Free Report
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What’s the forecast for the food and grocery industry?

The food and grocery sector thrived during the pandemic, largely due to the shutdown of the food service industry and the sector’s subsequent necessity, panic-induced bulk purchasing, and spending more time at home. The market has grown as a result of inflation. Consumer unwillingness to go out and socialize, and the reopening of several hospitality facilities, helped maintain the demand for groceries, particularly online, in 2021. As consumer behavior changes, we consume more food and drink at home, and inflation increases basket sizes. GlobalData predicts that the sector will continue to hold a higher share than had been predicted prior to the pandemic. This is true despite the fact that the food and grocery sector's share of overall retail will decline from its peak in 2020. This report will discuss market forecasts and key themes in the global food & grocery industry in 2022 and beyond. It covers:
  • Market drivers and inhibitors
  • Five-year forecasts and the impact of COVID-19
  • The performance of the online channel versus offline
  • Major trends in the market including rapid delivery, ambient retailing, supply chain disruption, and inflation
Assess developments within this sector to help your business thrive in 2022 and beyond.
by GlobalData
Enter your details here to receive your free Report.

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