MAGGIE PAGANO: Farmers take the hit (despite what supermarket bosses might suggest)
Morrisons has just slashed prices on hundreds of other items, from staples such as potatoes to more luxurious sirloin steak.
The supermarket giant hopes to cut costs by around 20% to win back customers attracted by discounters Aldi and Lidl.
Until last autumn, Morrisons was the UK’s fourth largest supermarket group, but was overtaken by Aldi. While this fierce cost-cutting is great for customers, it’s not so good for retailers battling for volume at the expense of profit margins.
Pressures: ONS data shows that while the price of farm inputs rose at an astonishing 26.8% in the year to October, farm produce prices rose to a significantly lower level of 17.7%.
Tesco’s operating profit margins now stand at around 4%, while other retailers have even thinner margins.
That’s probably why Tesco chairman John Allan declared war on food suppliers as well as rivals in his rather unusual outburst during a TV interview on Sunday.
Allan blamed food suppliers for the continued skyrocketing price hikes, saying it’s entirely possible they will profit by raising prices more than necessary.
His buyers, he says, are having vigorous discussions with many of their suppliers, asking them to justify the price increases.
They argued with many of them in the process. It’s completely normal for Allan to hit his vendors, but this time he may have gone a bit too far.
Minette Batters, patron of the National Farmers Union, is furious at her claims, suggesting Allan is living in a parallel universe if he thinks farmers and other food suppliers are profiting from inflationary pressures.
As she points out, her comments are disconcerting, as farmers and suppliers have faced a 650% rise in wholesale gasoline prices – and other rising inputs – over the past three years.
Other analysts have described Allan’s remarks as outrageous and simply incorrect, as suppliers go out of their way to justify every penny in price increase. So, who is right ?
Are puny farmers and wholesalers the bad guys? The evidence suggests not. Aggregate NFU figures show farmers absorbed the most painful price increases in energy, fertilizer and food, all of which soared after the lockdown and war in Ukraine.
ONS data shows that while farm input prices rose 26.8% in the year to October, farm produce prices rose to the still high, but significantly lower level of 17, 7%.
Overall, while farmers have had to raise prices, they have borne most of the costs themselves. Far from extorting customers or making profits, many have been forced to cut production while others go out of business.
That’s why Batters is right to push Rishi Sunak to establish a common national food security policy, find more ways to help increase local produce and make agriculture more efficient.
Allan should join his campaign.
Funeral plans
Direct Line founder Sir Peter Wood spearheads the consortium bidding for Dignity. While unfortunately the number of excess deaths over the past year is on the rise, Dignity has fallen into troubled waters.
He owes over £500m in debt and is short on cash.
But there is potential. Dignity operates over 700 funeral agencies and Sir Peter sees the opportunity to improve and expand his funeral planning business.
Investors have a choice. They can take 550p in cash (a 29% premium on shares from the time a bid was first made) and hold shares in private unlisted company Valderrama or opt for shares in the Castelnau Group, a listed investment fund managed by Phoenix Asset Management, in which Sir Peter has a stake.
Stay with me. It’s not that hard. But the benefit of taking shares in Castelnau offers investors a way out as well as the chance to see Sir Peter in action again.
Hit
Hats off to three British success stories.
Everyman Media has seen its revenue increase significantly over the past year. He plans several more theaters to add to the 38-person chain.
Billionaire Bill Ackman took a big hand in London-based Bremont Watches’ latest funding round because he loved the watches so much.
Third, English producer Chapel Down’s sparkling wine sales rose 53% after selling a record number of bottles of its premium sparkling last year.
Even better news, Chapel Down says consumer confidence is back strong after 15 months of decline.
