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September 27, 2011

WRC 2011: Deloitte warns on commodity prices

Food prices will rise again when global economic conditions improve, a senior executive at Deloitte has said.

Food prices will rise again when global economic conditions improve, a senior executive at Deloitte has said.

The price of some commodities have stabilised in recent months. Last week, food industry analysts Rabobank said, for example, that international dairy commodity prices fell during the third quarter of the year as consumer demand fell and supply increased.

However, speaking to just-food at the World Retail Congress in Berlin, Deloitte global research director Dr Ira Kalish says that prices would rise should the economy improve, a situation he believes is very likely.

“Global commodity prices have become dampened, although when the economy recovers they will go up. There is definitely pressure at the retail level,” Dr Kalish said.

He believes firms must look to their supply chains, manage costs and investigate private-label options if they are to reduce the impact of higher prices.

Despite the pressure grocery retailers face, elsewhere, Dr Kalish believes that emerging markets present a major opportunity. “It’s the development of a middle class and two income households that moves modern retail,” he said.

“In poorer societies men work and women stay at home, but if both are working it makes more sense to go the hypermarket at the weekend. It’s the change in household behaviour that leads to modernisation.”

Dr Kalish also believes the hard discounters, which have recently gained share in some markets at the expense of other supermarket chains, will continue to thrive following the recession. The discount outlets, he said, have “global potential”.

He added: “Aldi and Lidl were doing well before the recession and tapping into the price sensitivity of consumers. Discounters do well with upper income consumers because there is a perception of high standards and lower prices. They have a format that can succeed in any country.”

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