Food costs pose challenge for buyers

The price of buying foodstuffs over the counter in the UK has soared over the past two years.
Recurrent hikes to the price of crude oil and an increase in demand for commodities worldwide have led to dramatic jumps in food inflation, affecting the cost the average UK shopping basket.
Food inflation in the UK stood at 4.6% in February 2011, a rise of 0.6% in the space of just two months - with the price of bread, meat, fruit and vegetables being amongst the highest risers.
The rising cost of food is not restricted to the UK alone, with the United Nations warning that food costs are now at the highest level for 21 years and are set to rise by 40% over the next decade.
A dire warning indeed, and one that generates serious challenges for buyers and procurement professionals servicing the UK marketplace.

Food for thought

So what are the driving forces behind the rise in food prices?
The growing demand for more high-quality food amongst emerging markets such as China and India
  • Increased use of wheat, coarse grains, vegetable oils and sugar for biofuel output
  • The continued rise in the price of crude oil, prompted most recently by unrest in the Arab world
  • Recent extreme weather resulting in poor crop yield across the EU and US
  • A rise in the cost of limited, food-based commodities due to global demand
  • Larger supermarket groups inflating the cost of goods in order to offset their own high costs and maximise profits

Hitting home

Food inflation, the rise of the VAT rate to 20%, low wage growth and an overall increase in the cost of living in the UK in recent years have all resulted in consumers altering their habits in relation to how they shop and what they buy.
Procurement and purchasing professionals who want to provide continued profitable options for retailers need to look at alternative methods of buying and sourcing goods if they're to succeed in today's much altered climate.

The buyer's challenge

In the face of constantly shifting global conditions and rising food prices, buyers face the growing challenge of sourcing products at competitive costs, without compromising on quality or service for the retailer or end user.
Just as shoppers change their buying habits, purchasers are also looking at new ways of doing business, such as:
  • Developing and establishing new supply channels across a number of more diverse markets
  • Seeking new ways to reduce costs of shipping and dependence on expensive commodities
  • Responding to contemporary consumer demands and trends by sourcing desired goods
  • Developing networks and working in tandem with other buyers and suppliers to bring back the best deal
For more information on what this means for your career as a buyer or procurement professional please get in touch with your local Michael Page Retail team.