Price hikes hit retailers

11 January, 2008

Independent retailers are likely to be the hardest hit by drinks suppliers' above-inflation price hikes this year.

Many suppliers - facing spiralling costs in raw materials and utilities - will seek to raise prices in annual negotiations with retailers and wholesalers.

Constellation-owned Gaymer Cider Company is currently negotiating price increases of up to 10 per cent with its customers. Managing director John Mills said the cost pressures the company faces are "horrendous - the worst I can remember in 20 years".

The price of oil and plastic packaging, sugar and apple juice concentrate have all rocketed - with concentrate tripling in price - over the past year, Mills added.

He said: "We will be increasing our prices to our customers. The amounts will be slightly different depending on the discussion, but will be in the 5-8 per cent range. There will also be some at 2 and 10 per cent. It will be way ahead of inflation."

Coors said it is "facing very severe price pressure on a whole range of raw materials - hops, barley, metal and energy - and while we take every step to absorb price inflation, inevitably it will pass into wholesale prices in the coming months."

Marston's Beer Company national sales director Steve Benton has not ruled out increases, citing rising costs "including a 70 per cent increase in malt costs, 40 per cent increase in the cost of sugar and 40 per cent increase in the cost of hops, which are all out of our control". Marston's would work to "ensure sustainable business and best possible pricing for our customers, the consumers and our business", Benton said.

Wells & Young's managing director Nigel McNally said: "It's a fact that producers have faced significant cost increases in a number of areas affecting their business. Th ese include utilities, cans, bottles and actual raw materials. It's clear some suppliers will have to pass those costs on to remain in business."

Tesco and Asda have vowed to keep retail prices down in 2008.

Tesco head of BWS Dan Jago said the supermarket will work to ensure customers "get the best possible value" despite the inflationary pressures across the marketplace. A statement by Asda said: "Low prices will be all the more important in the New Year as the current credit crisis looks set to put a squeeze on household spending."

Wholesalers - working to lower margins than the multiple s and with less power to negotiate or absorb costs - have been forced to increase prices, which will hit independent retailers and make it harder for them to compete.

Steve Parfett, managing director of Parfetts Cash & Carry, said the company had no option but to pass on increases. "We don't have the same ability to refuse price increases that the multiple supermarkets do. We don't try to make any gains out of it but we can't absorb those costs.

"I think there's a lot of pressure on prices at the moment. We have been through a long period where price increases have been the exception rather than the rule, but that has come to an end. We will now see annual price increases."

Parfett said the supermarkets' tough stance on pricing could "further exacerbate the waterbed effect that the Competition Commission denies exists and further disadvantage us".




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