Although those directly involved in the food chain had been all too aware of the upswing in prices for a number of years, the situation attracted far more political and mainstream media attention this year as commodity prices reached unprecedented highs.
Between August 2007 and July 2008, food inflation is said to have contributed around a third to overall inflation. Modest income households were particularly hard hit.
Prices have now fallen, but in a communication published this week the Commission says that the underlying causes for the surge in price, particularly at the commodity end, in the medium-long term, “have not disappeared and must be dealt with”.
These causes are given as regulatory restrictions, insufficient competition and speculation.
Food manufacturers have seen their margins swallowed as ingredient suppliers have had to up prices to protect their own bottom lines. They have had to take a long hard look at their formulations, to see whether there are possibilities of products using
Some of the costs, particularly those related to commodities that form the major part of a food stuff, have also had to be passed on to retailers, by whom they are either absorbed or passed on, in turn, to consumers.
However there has also been some attention to retailer practices, such as the amount of time they take to pay their suppliers, and fees associated with promotions.
As part of a proposal to review “potentially-restrictive” regulations at a national and/or EU level, the Commission said: “Late payments by retailers or excessive fees demanded from producers for promotional offers should be reviewed.”
A retail monitoring exercise of the retail market is planned, and this would be the context for a scrutiny of restrictions that restrict market entry. Such regulations would be “removed where appropriate while keeping in mind their environmental and social goals”.
The Commission also said that consumers should be better able to compare prices. It plans to set up permanent monitoring of prices.
EuroCommerce reaction
EuroCommerce has said it broadly supports the communication, but said that market realities must not be swept aside.
It says that retailers work hard to offer the best deal to consumers, and that they are the last link in a complex chain. That chain, it says, is often dominated by large intermediaries or manufacturers.
“Commerce wholly rejects any implication that responsibility for recent price increases should lie at its door or that it is failing to pass price increases on to consumers.”
EuroCommerce secretary general Xavier Durieu said: “The price transmission issue is highly complex and largely depends on the degree of competition throughout the supply chain.”
Durieu also advocated looking at price levels over a longer period than one year, as this fails to take account of “exceptional circumstances”.
Other proposals
The Commission is also proposing to examine regulators of commodity markets, in a bid to discourage volatility that “benefits neither producers nor consumers”.
As for promoting overall competitiveness in the food-supply chain, a high level group has been asked to make recommendations in this area early next year.