We will have to wait until the end of this year to hope for a slowdown in the increase in food prices. So far, the level of food inflation has remained a concern, unlike the prices of many raw materials, which precisely experienced a sharp drop last year.

Eurostat recently indicated that inflation for food, alcohol and tobacco increased by +13.6% in April. This percentage is slightly lower than in March (+15.5%) but no other product category has seen such a price increase in the European Union.

“Previously, high energy prices were the main driver of inflation. Now food prices are extremely high. We are moving from an energy crisis to a food crisis. This situation has an impact on consumption and leads, from a geopolitical point of view, to serious problems in poor countries. It is mainly African countries that suffer from food inflation.” These are the words of Johan Geeroms, our Director Risk Underwriting Benelux.

We have been seeing a slowdown in commodity price increases for quite some time. Wheat and soybean prices have returned to 2021 levels. Other commodities are also showing steep declines, albeit less dramatic. Why did food prices stayed so high? This phenomenon is closely linked to the operating costs of food producers and distributors.

What are the fees for the food sector? Our study shows that in 2022, energy (oil) increased by +43%, electricity by +145%, packaging costs by +24% (paper), glass by +18% , metal by 23% and plastic by +16%, compared to 2021. Labor (in retail) +5%.

According to the study, these higher costs mainly affect food distributors. They passed the majority (but not all) of the fees on to the customers. In 2022 alone, producers in the food sector increased their prices by +17% (y/y), against ‘only’ +12% for food distributors. Financial data from publicly traded food retailers confirms that their costs have grown faster than their revenues. Consequently, gross margins have declined in 2022 until they are below pre-pandemic levels.

If we go even further, we find that the total cost index for the European food sector increased, during the second quarter of 2022, by +6.7%, while the turnover only evolved by a small +0.8%. Since then, we observe that the growth of turnover is faster than the cost index. The analysis of pricing helps to explain this phenomenon. It shows that food companies are trying to make up for lost margins and are trying to make a 'profit' by keeping prices relatively high.

According to the study, since mid-2022, around 10% of the price increase is not attributable to an increase in costs (of energy and production).

This study shows that food inflation varies greatly from one country to another in the European Union. Food inflation in the countries of the southern part of the EU is below the European average: in France +7.3%, in Italy +9.3% and in Spain +11.6% against higher scores to the average in Germany +12.6%, in Poland +14.5% and in Slovakia +18.6%.

75 results

european-savings

Apr 19, 2024

Belgians get substantially more money

The average amount Belgians added per year over the past 20 years in financial assets was €2,380. This is according to our report on private financial assets in the nine main EU countries. Read more.

strategies

Apr 10, 2024

The risk of payment default increases considerably

Global companies are paying their invoices later and later. On average, the global DSO increased by +3 days, to 59 days by 2023. Want to know more? Read it here.

strategies

Mar 26, 2024

What are the forecasts for the automotive industry?

Our Economic Research Centre outlines the outlook for the automotive sector in this report. Read the summary here or download the report.

75 results