It seems that inflation will remain a hot topic for everyone within the next few months, but maybe especially for those in the food and drink sector. The February figure will be out soon and many are expecting it to be 2% or over. The last time that happened was in 2013, and only a year ago, the figure was a measly 0.3%. I am doing my research as I have been asked to be part of a panel to discuss rising inflation at the forthcoming convenience show in April! It does seem as if there may be a perfect storm brewing with various factors coming together at once. Let’s have a look at them and what we can do about them.
First of all, there is the matter of Brexit. OK, not all products come from abroad, in fact the majority within the speciality food sector are made within the UK, but many products use ingredients from the Eurozone or even further, as our taste buds are more adventurous than they used to be. Potentially there is huge pressure here, as already indicated by Heinz Baked Beans rising 9%, San Miguel 4% and Hovis Wheatgerm Medium Loaf an astonishing 31% up. Inevitably the cost of production of many food and drink products is going to rise, and so they should. Producers should pass on these costs to the wholesalers and retailers. However, we can mitigate rises by buying British products with British ingredients in them.
However, there are still other inflationary pressures, which will force even British products up. Everything has to be transported to the retailers and diesel prices are the highest now than they have been since 2014. What can we do about this? Consolidate your deliveries, and it is likely that larger orders won’t incur any extra charges or higher MOQs from direct supply. Some retailers are expecting a hike in Business Rates which has been in the news this week. A crazy decision in my mind. Local governments should be encouraging High Street businesses, not discouraging them.
Finally, there are two staff costs that will impact in full this year. One is pensions – this will be the first full year that the company contribution to pensions for small businesses will be present in every wage run. The second is the Living Wage. If I had a living wage for every employer that I have heard moaning about it, I could have retired. I simply don’t understand, as an employer, how you could contemplate paying someone less than they need to live on. Why should the government bail out stingy employers? And why would you want unhappy staff who don’t get paid enough to live on? In any event the government figure is a wrong one at £7.20 (rising to £7.50 in April) - the real figure is £8.45, which I wouldn’t pay anyone less than. Stop moaning and pay your staff properly. If you need to increase your prices slightly to do it, then please do. The cost of food here is less as a percentage of income than many other 1st world countries anyway.