ASDA pledges flexibilty over food price increases
costs associated with rising food prices. Where increases are
unavoidable it will balance these out in the shopping basket by
keeping non-commodity-linked foods as low as it can.
When the cost of commodities goes up, as in the case of wheat which reached US$9 a bushel this week, the increases usually inch their way along the food supply chain - from farmer, to ingredient supplier, to manufacturer, to retailer, and ultimately to the consumer. But ASDA has said it is taking a flexible approach to costs and seems prepared to let the buck stop there - if it makes business sense to do so, that is. ASDA's stance was initially reported in UK newspapers as a pledge not to increase food prices at all, even as bakery manufacturers such as Premier Foods and Sara Lee say that their products are to become more expensive. A spokesperson for the retailer clarified to FoodNavigator.com that this is not the whole story. "We will take the cut sometimes, and we will take the hit sometimes," he said, adding that the overall aim is to keep prices as low as possible. But avoiding price increases on commodity linked products would be unfair on the company's suppliers, he said. Milk, for example, does not come with much added-value, so ASDA would have to make its farmers take the hit. On one level such flexibility is a shrewd public relations move on the part of the retailer which, as the last link in the chain, has a direct interface with consumers. The news will give some measure of relief to food manufacturers and ingredients suppliers, that their price increases will not be met with resistance. In the competitive retail environment - especially one where discount retailers like Lidl and Aldi are jostling to offer the lowest prices possible - it is quite likely that other supermarkets will make an effort too. There have also been some indications that European consumers are unwilling to pay more for their food basics. The BBC yesterday reported that consumer organisations in Italy are asking people to refrain from eating pasta for one day as a symbolic protest against rising prices. In fact, it seems consumer reaction has been somewhat over-egged. Responses to the BBC article has shown Italians living in Italy and the UK don't really expect anyone to take notice. The vast majority of people will continue to eat pasta on a daily basis. Furio Bragagnolo, president of Italian pasta manufacturer Pasta Zara, agreed that the answer does not lie with consumer resistance. Rather, he believes action on food prices should be taken at government level. A meeting is scheduled for September 20th for Italy's agriculture and industry ministers to discuss appropriate action to prevent durum wheat prices rising much beyond the 73 per cent rises already experienced in the last two months (from €0.26 to €0.45 per kg). The key, he said, will be to increase the land allotted to growing the crop. However he does not expect the results of this to be realised for two years, since this year's harvest has already been planted.
