Mon, Oct 15, 2007 page11

• Consumers in Europe battling rising food bills

  INFLATION TRIGGERS Growing demand for food in developing countries, bad weather and the loss of farmland to biofuel crops are behind price rises

  • AFP
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  European consumers will have to devote a growing share of their budgets to food amid a relentless rise in prices, which companies blame on a global boom in the cost of farm products.

  "The price of milk, butter and pasta have already risen by 20 [percent] to 25 percent on aver-age," said Jean-Pierre Roelands, commercial director for Belgian supermarket chain Colruyt.

  "Now the impact is going to be felt on processed products like yoghurt, cheese and breakfast cereals with an increase of 10 percent expected by the end of the year," he said.

  "For vegetable oils such as peanut and sunflower oil, it's even stronger. We're expecting an increase as high as 30 percent between November and December," he said.

  The reason is that prices for farm commodities are booming worldwide due to surging demand in fast growing developing countries, bad harvests caused by unfavorable weather and the increasing use of farmland to grow biofuels.

  French food giant Danone plans to raise the prices it charges retailers by 10.48 percent on average in France next month while Europe's second biggest cheese maker, Lactalis, is to lift its prices by 15 to 17 percent in early December.

  "Raw materials are very important in factory prices. For emmenthal [Swiss-style cheese], milk represents 80 percent of production costs," Lactalis president Michel Leonard said recently in an interview with French newspaper Les Echos.

  Soaring food prices are increasingly turning up in overall inflation reports as a main driver of higher overall consumer prices in Europe.

  In Italy, bread prices have jumped 7.3 percent over one year while the cost of pasta, the national dish, has climbed 4.5 percent and food industry association Federalimentare expects more increases.

  "According to our forecasts, we are expecting an increase [in prices] of 2.4 percent by Christmas," Federalimentare president Giandomenico Auricchio said.

  Economist Sylvain Broyer at French bank Natixis said that although processed foods represent only 12 percent of European households annual consumption, "that's enough to make inflation sentiment among European households jump."

  "The consumer is particularly sensitive to everyday purchases," he said. "The consumer is also more sensitive to prices of products that he can forgo only with difficulty, like food."

  The secretary general of the Eurocommerce association European retailers and wholesalers, Xavier Durieu, said that consumers were seeing a "catch-up" in prices after several decades of tame food prices.

  However, many consumers find that argument hard to swallow, suspecting that big companies are using rising raw ingredient costs as a pretext to artificially lift their profit margins.

  In Spain, some consumer associations have spoken out against retailers' lack of transparency and have urged the public to be on guard.

  Faced with growing pressure to do something about food prices, politicians are beginning to act and French Consumer Affairs minister has put companies in his sights.

  "I've seen milk prices fall 25 percent in the past, but I've never seen the price of yoghurt fall 25 percent. We can't always have prices being pushed up and never pushed down," the minister said.

  For your information

  PRICE HIKES

  * The price of milk, butter and pasta has risen 20 percent in Belgium; prices of processed foods are expected to rise 10 percent by year's end. * Danone plans to raise the prices it charges retailers in France by an average of 10.48 percent. * Bread prices in Italy have jumped 7.3 percent in the past year while the price of pasta has increased by 4.5 percent.
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