A potential fuel surcharge might soon be introduced to the popular bread brand Kingsmill due to the Iran war, as per insights from the Mirror. Allied Bakeries, the manufacturer, is currently engaging in preliminary talks with various retailers, contemplating the addition of a levy tied to the conflict.
The anticipated surcharge, estimated to be under 5p per loaf, aims to offset the heightened energy expenses for bread production and transportation to retail outlets. Retailers will have the discretion to pass on this cost to consumers. Presently, a standard 800g loaf of Kingsmill 50/50 medium soft white bread retails at £1.05.
The escalating energy crisis resulting from the ongoing conflict poses a threat of increased operational costs for energy-intensive industries and agricultural sectors reliant on fertilizers, including food producers.
George Weston, the CEO of Associated British Foods (ABF), the parent company of Allied Bakeries, mentioned that current protective measures such as “hedging” have shielded them from immediate cost impacts. However, sustained high oil prices could alter this scenario. Additionally, the company produces other bread brands like Allinson’s and Sunblest.
In contrast to the UK operations, ABF’s bakery business in Australia, particularly the production of Tip Top bread, lacks the same hedging protection against energy price fluctuations. Consequently, a fuel surcharge has been implemented for bread products in Australia.
The disruption in fertilizer supply and costs due to Iran’s actions in the Strait of Hormuz has significantly affected farmers, potentially leading to increased crop prices in the upcoming season.
While fuel surcharges are typically associated with airlines, many businesses in Australia have already adopted similar levies to counter the surge in fuel prices. These surcharges are distinct from general price increases as they target specific cost escalations and can be revoked when conditions normalize.
ABF, which also owns the retail chain Primark, has disclosed plans to spin off Primark as an independent FTSE 100 entity. The company is actively managing the repercussions of the Middle East conflict, albeit acknowledging risks to Primark’s sales if the conflict persists and consumer spending weakens.
The Food and Drink Federation has cautioned that the cost spikes induced by the Middle East conflict may take several months to impact retail prices, projecting a potential 9% to 10% food price inflation by Christmas regardless of the conflict resolution.
Urgent government interventions are sought by industry stakeholders to support energy-intensive sectors and avert possible business closures due to soaring costs. The FDF emphasizes the vital role of energy across the food supply chain and urges prompt regulatory adjustments to mitigate the impending inflationary pressures.
Karen Betts, Chief Executive of the FDF, urges swift government actions to alleviate regulatory burdens before inflationary pressures amplify, stressing the critical need for timely responses to prevent price escalations throughout the food system.
