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The world’s largest food company, Nestlé, announced an unprecedented sharp rise on Friday. “The current economic situation is forcing us to increase prices for selected product categories in the range of four to 13 percent,” Nestlé Czech spokesman Robert Kičina referred to supply disruptions and rising prices due to the pandemic.
This is important news. The group, which globally includes about two thousand brands, also occupies a significant space on the shelves of Czech stores. It includes, among others, the Orion, Bon Pari, Lentilky, Kit Kat, Margot, Student Seal, Kofila, Nescafé, Granko, Maggi and Beba baby food brands.
Although we have long tried not to pass on the increase in costs to prices, their further growth no longer allows us to keep the current price level. Therefore, from November we have been increasing the prices of selected drinks for gastronomy. On average, this is an increase of 5 percent.
“The rise in commodity prices has hit the coffee segment hardest, with Arabica and Robusta prices rising by tens of percent due to the drought and frosts in Brazil and higher transport prices. Climate change has also caused increased demand and a consequent rise in prices for wheat and corn, which are the main component of cereals in particular, “he explained.
According to Nestlé, the increase in prices is also due to more expensive oils, a lack of sugar and also rising prices for packaging materials. For example, arabica coffee has risen in price by 52 percent, sugar by 41 percent, corn by 42 percent, cans by 50 to 100 percent, shipping by 30 percent and energy by 120 percent, the company said.
Kofola, muesli and yoghurts
Other food companies will also become more expensive, the editorial staff of SZ Byznys found out. In the coming weeks, many of them will, for the first time this year, reflect in prices the higher costs caused by the covid crisis, as they traditionally start negotiations with retail chains on long-term supplies by the end of the year.
“Although we have long tried not to pass on the increase in costs to prices, their further growth no longer allows us to keep the current price level. Therefore, from November we have been increasing the prices of selected drinks for gastronomy. On average, this is an increase of 5 percent, “admitted Daniel Buryš, CEO of Kofola. In addition to retro lemonade, the group in the Czech Republic includes, for example, the Ondrášovka and Korunní mineral waters, fresh Ugo juices or Leros herbal teas.
In the next wave, by the end of the year, Kofola will also increase the price of retail deliveries. The main reason is the increase in the prices of energy, transport, packaging materials or sugar. In addition, the company raises wages so that real earnings are not reduced due to high inflation.
The mentioned price list reflects the situation of wholesale. The prices that customers will see on the shelves may rise less, but also more, depending on the extent to which retailers pass on the prices to the final prices of soft drinks.
The famous Emco breakfast muesli will also be more expensive. “Yes, we are becoming more expensive, we are just sending new price lists to our customers. We increase prices in the relation from zero to ten percent. Rapeseed oil, sugar and packaging materials, especially cardboard, are the most expensive, ”said Martin Jahoda, the company’s director.
Sugar factories are healing wounds from the past
Rising sugar prices are also pointed out by other companies. According to Jiří Hollein, the head of Moravskoslezské cukrovary, which is the second largest sugar producer in the country, the price of sugar in the Czech Republic has risen by about one crown per kilogram since October. There are two main reasons. Sugar factories are compensating for the heavy losses from previous years, when prices fell sharply due to the release of EU quotas. The second reason is the rising prices of beets, which are declining in the fields at the expense of rapidly rising and more economically advantageous maize, rape and wheat.
The Karlovy Vary producer of premium yoghurts, Hollandia, is also taking an unpopular step. “Admissions are becoming more expensive (raw materials, energy, wages and other costs, ed. note) and we have to reflect that in prices. Business partners take a different approach to this and are reluctant to accept it, “says Michal Škoda, CEO of Hollandia Dairy. In addition to food commodities, he also mentioned the impact of more expensive energy, wages and logistics costs. “Plastics have become more expensive. A tonne of polypropylene has risen in price from $ 500 to two thousand dollars since February, “he added.
Before announced increase in price of some especially small and medium-sized bakeries. Many companies are still negotiating business conditions.
“We plan to raise the price probably from April 1, 2022. The prices of all ingredients, packaging, wages have increased. They are up 200-300 percent of the price of electricity, because no one wants to fix our prices for a long time, “said Gevorg Avetisjan, owner of the honey cake manufacturer Marlenka.
The largest domestic dairy Madeta is also striving to increase prices. “I expect to increase the output prices of our products by two to three percent from January 1. But that is our effort. I don’t know if this will be agreed and ratified at the moment, “said Milan Teplý, director of SZ Byznys. Madeta has already started a round of negotiations with retail chains on this topic.
Inflation in the Czech economy deviated significantly from the 2% tolerance band of the Czech National Bank. In September, prices rose by 4.9 percent year on year. The price level is increased mainly by rents, energy, fuels and also transport. Together, they contributed 2.3 percentage points to inflation. The increase in food and non-alcoholic beverages corresponded to 0.3 percentage points. However, the statements of food producers show that the sharp rise in cost prices is only beginning to be reflected in their price lists, and Czechs will only become more expensive to buy food in the coming months.
Food rises in price from “forks”
Signals of a rocketing rise in prices also come from agricultural production, a sector directly linked to the food industry. “The biggest impact is probably on fertilizers, when, for example, the price of potassium fertilizers has halved in the last two weeks, some special fertilizers have even doubled,” described Vladimír Pícha, a spokesman for the Agricultural Association.
The biggest impact is probably for fertilizers, when, for example, the price of potassium fertilizers has halved in the last two weeks, some special fertilizers have even doubled.
“Another problem is that there is a great deal of uncertainty as to whether fertilizers will be available, as production plants are reducing production due to rising energy prices,” he added. Feed prices are also rising. According to Pícha, the producers have now announced an increase of ten percent and the price of feed scrap is expected to increase in connection with the increase in the prices of oilseeds and cereals. The second thing is the lack of some feed ingredients on the market. For example, urea or some trace elements are missing. Machine repairs are becoming more expensive and the prices of new technology are also expected to increase.
According to Pícha, however, the rise in plant commodity prices does not match the rise in costs and farmers are beaten.
“The cost price of milk increased by approximately a crown per liter, but the selling price of milk remained the same. There will probably be further disruption of pig farming, because especially for breeders who buy all feed, the growth of prices of raw materials and services is critical, because pigs sell at record low prices, “he added.