“We are raising prices, where necessary, around the world,” he told the BBC, adding that his firm has increased prices on more than half its products in the United States, Kraft Heinze’s home market, in recent days.
The firm—famous for making tomato ketchup, baked beans, and macaroni and cheese—is dealing with a rapid increase in agricultural costs, including oils and cereals. The surge has pushed the global food price index to a decade high, according to September data released by the United Nations.
“Specifically in the UK, with the lack of truck drivers,” Patricio said, explaining why there is a surge in food price increases. “In [the] U.S., logistic costs also increased substantially, and there’s a shortage of labor in certain areas of the economy.”
The CEO, however, stated that not all costs should be passed on to consumers.
“I think it’s up to us, and to the industry, and to the other companies to try to minimize these price increases,” he added, noting that “there’s a lot to come in technology to improve the effectiveness of farmers” that may help.
But Kona Haque, head of research at the agricultural commodities firm ED&F Man, told the BBC that food giants like Kraft, PepsiCo, and Nestle will likely “have to pass that cost on to consumers.”
“Whether it’s corn, sugar, coffee, soybeans, palm oil, you name it, all of these basic food commodities have been rising,” she said, noting recent challenges to the global market.
“Poor harvests in Brazil, which is one of the world’s biggest agricultural exporters, drought in Russia, reduced planting in the U.S., and stockpiling in China have combined with more expensive fertilizer, energy, and shipping costs to push prices up,” Haque remarked.
In a letter to the U.S. Securities and Exchange Commission, PepsiCo recently warned it is facing rising costs on transports, raw ingredients, and more. Prices are expected to rise next year, the firm said.
“When prices increase, we may or may not pass on such increases to our customers without suffering reduced volume, revenue, margins, and operating results,” the firm said.
The U.N.’s Food and Agriculture Food Price Index rose even more in September 2021, up about 32 percent from September 2020.
It was, according to the U.N., “largely driven by higher prices of most cereals and vegetable oils” while “dairy and sugar prices were also firmer.” The meat price sub-index remained stable, the agency said.
David Ortega, associate professor and food economist at Michigan State University, said food prices will be impacted by a number of factors in the short term.
“Consumer behavior is changing and demand is increasing as consumers are starting to re-re-emerge from this latest surge of covid cases,” Ortega said in a recent interview. “There are some serious supply chain logistic issues which are affecting shipping and transportation times that are adding to rising costs. Labor shortages and rising wages are also partly to blame.”