Food and Drink Federation welcomes further drop in retail inflation

LEEDS, UK - 5 SEPTEMBER 2015. Thorntons Chocolate Shop. People walking past and into the Thorntons Chocolate shop on a busy shopping day in Leeds.

The UK’s Food and Drink Federation has welcomed latest figures showing a notably drop in inflation impacting the sector, including for confectionery and snacks, as the organisation urges government support for small and medium-sized businesses to ensure greater levels of investment, writes Neill Barston.

As Confectionery Production has previously covered, prices of confectionery and other product ranges had rise to near 40-year highs over the past year, up between 15-20%, as retailers struggled to adapt to major hikes in core ingredients costs.

According to the government’s latest figures, retail inflation is now down to 10%, yet shoppers are unlikely to see any major differences until into the New Year, as stores look to maximise Christmas season sales after an extremely challenging period.

As analysts have noted, the ongoing war in Ukraine, rises in energy costs, and uncertainty in a number of markets around the world had contributed to pushing up key retail prices – which in fact dampened demand in some locations for luxury treats amid this year’s cost of living crisis for many countries around the world.

Karen Betts, Chief Executive, The Food and Drink Federation said: “It’s good to see food and drink price inflation fall again, for the seventh consecutive month, to 10.1 per cent in October from 12.2 per cent in September. This reflects a fall in some input costs – although these are not falling uniformly across the board – as well as the efforts that food and drink manufacturers have taken over more than two years to shield shoppers from the full impact of inflation.  This has impacted manufacturing margins, which have fallen to their lowest levels in 40 years.

“While today’s figures are good news for shoppers, they come at the same time as we are seeing a concerning drop in investment in our industry, with investment in the first half of this year more than a third lower than in the same period four years ago.  For the industry to recover its resilience after the shocks of recent years, we need the government urgently to review the conditions for investment in our sector. Making full expensing permanent in the Autumn Statement would be significant in incentivising investment. As would concerted government action to improve existing and planned regulation that is adding avoidable costs to the industry, from Extended Producer Responsibility, the Plastics Packaging Tax, “Not for EU” labelling and the Apprenticeship Levy.”

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