Bakers' woes may continue despite UK inflation dip

09-Sep-2008 - Last updated on 10-Sep-2008 at 12:16 GMT

An overall decline in manufacturing costs appears unlikely to shift food processor concerns over higher prices for their goods, according to new UK statistics out this week.

Like a number of global food segment as a whole, bakers have been struggling over the last twelve months to balance increasing input costs like fuel and ingredients with pricing for their products.

The UK’s Office for National Statistics (ONS) said that input price inflation, which relates to costs for the purchase of fuel and other ingredients throughout the country’s manufacturing sector, was down by 3.3 percentage points in August.

The same figures suggested that the price of finished goods also dropped over the month, although costs for food products like breads, milk and meat remain a problem.

These concerns may not be alleviated for some time though, according to the new statistics.

Factory food prices

In ONS figures cited by the Reuters news agency, factory food prices, which relate to the price charged by manufacturers for their products, were up by 12.5 per cent on the year, despite a fall in prices for some ingredients like wheat.

The same figures suggested that although manufacturer input costs for wheat had fallen sharply, this was likely to be attributed to a reliance of poorer quality of crops ahead of a delayed cereal harvest, Reuters stated.

Baker price plans

Multinational baked goods suppliers like Allied Bakeries, which owns a number of brands such as Kingsmill, Sunblest and Burgen, have made price increases a key part of their current financial strategies of late.

In a pre-trading update regarding its full fiscal performance for 2008, Allied Bakeries' owner Associated British Foods (ABF), said that increased input costs have had to been passed onto consumers over the twelve months.

“Price increases have recovered commodity cost inflation but substantial increases in energy prices remain a feature of the current trading environment,” the company stated. “Revenue growth was driven by these price increases and by higher volumes.”

Back in July, Gordon Polson, director of trade body the Bakers Federation said that concern amongst bakers over the high prices faced by consumers for their products would not likely be alleviated overnight.

He told BakeryandSnacks.com at the time, that the current high prices paid for staple goods like bread were a result of a number of factors such as an increasing global population and high demand, making them unavoidable.