Blog: Dean BestCommodity cost concerns

Dean Best | 16 November 2009

Pressure from commodity costs have eased since the spikes seen in 2008 but a cursory look at the quarterly numbers issued in the last fortnight shows raw material prices remain a concern for food manufacturers of all shapes and sizes.

Companies may have been cheered by the tumbling cost of dairy commodities since last year's peak but food firms still face challenges across other raw materials. And UK firms bringing in ingredients from Europe have seen the appreciation of the euro drive up their raw material bill.

Moreover, on Friday (13 November), an analyst report crossed our desks that highlighted the problems the world's chocolate manufacturers will face in 2010. The report said confectioners will continue to have to walk a "tightrope" between high cocoa and sugar prices and a weak consumer environment, in which it will be difficult for manufacturers to pass along the higher costs.

With that in mind, food manufacturers and retailers will flock to this week's Food Ingredients Europe exhibition in Frankfurt to discover more about how their suppliers are faring in such a volatile economic environment. Food ingredients manufacturers from around the world, including the likes of ADM, Barry Callebaut, Cargill and Tate & Lyle will be present and they, among others, will seek to show just how they can add value to their customers' businesses.

But cost will not be the sole burning issue. Exhibitors will look to showcase a plethora of new products that they claim will generate revenue for brand-owners; ahead of the show, Tate & Lyle has issued research that it claims shows consumers are still looking for healthy products - and crucially will pay more - despite the downturn.
just-food will be one of the thousands of attendees at the exhibition; keep your eyes peeled on our news, blog and Twitter pages for the latest from the event.

The latest big news to reach us this morning is the announcement from dairy giant Arla Foods that it is looking to build the world's largest fresh milk dairy on the outskirts of London.

The planned investment is something of a surprise; Arla has restructured its operations throughout Europe this year, including in the UK, and scores of jobs have been affected.

The project is also a surprise boost for UK manufacturing; in recent years, dozens of foreign FMCG firms have tended to scale down or close their UK operations and take production to cheaper climes. Does the weakness of the pound mean that the UK is suddenly a more attractive place for investment?


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