Food prices are set to increase by about 10 percent before the end of November as the country’s major food producers take strain from rising input costs, according to major food firms.
In an interview last week, Andre Hanekom, the chief executive of Pioneer Foods, said consumers could expect to pay at least 10 percent more for bread and mealie meal before the end of the festive season.
This was mainly attributed to rising input costs for raw materials, operational inputs such as electricity and fuel, and wages, as well as the drought in the US, which has driven international maize and wheat prices to record highs.
The company could not reveal figures associated with input costs as it was still in a closed period. Pioneer Foods owns brands such as Bokomo and Sasko, among others.
Tiger Brands confirmed on Monday that there had been significant increases in the costs of soft commodities and basic crops across the globe.
“This has resulted from crop failures in certain key geographies, as well as general inflation of input commodities such as fuel,” Tiger Brands said.
The listed food giant said local manufacturers were subjected to the global cost increases in addition to the country’s inflationary pushes related to fuel, labour and energy price increases.
“This is certainly not a ‘blanket’ cost increase, and is carefully calculated for every product and category to protect the consumer as far as possible,” Tiger Brands said.
Tjaart Kruger, the chief executive of Premier Foods, said the considerable increases in raw material prices had put food producers under pressure. They would have to pass some of these costs on to consumers.
Analysts indicated earlier this year that prices would continue to increase because there was nowhere for consumers to buy cheaper products, with food price inflation running at levels of between 15 percent and 17 percent. Throughout the year there have been rampant increases of raw material costs, with maize spot prices increasing by more than 100 percent.
Jiten Bechoo, an equity analyst at Avior Research, said price hikes of 10 percent were too low to maintain satisfactory profit margins because if increases were not fully recovered, margins would continue to shrink over the next 12 months.
Jean Pierre Verster, an equity analyst at 36One Asset Management, said there were added cost pressures due to electricity and wage increases over the last year, exacerbated by the weaker rand which put pressure on import prices.
Products such as pasta are cheaper to import and compete with goods from Tiger Brands. Consumers might trade down from eating poultry to baked beans as some sources of protein became expensive.
Kevin Lovell, the chief executive of the Southern African Poultry Association, said the effects of the price increases would hit the poultry industry. These were also global problems as the worldwide industry saw a 30 percent hike in maize prices and soya beans.
“The main inputs of maize and soya beans, which make up about two thirds of production costs, have gone up,” he said. Additional reporting by Nompumelelo Magwaza
Business Report