Record jump in UK inflation as food prices rise

Price rises in the UK have shown the biggest increase in more than 20 years, official figures show.

The consumer prices index, which measures the cost of a typical “shopping basket” of goods and services, rose from 2% in July to 3.2% in August.

Higher prices for food, petrol and used cars were all behind the spike in inflation, the Office for National Statistics (ONS) said.

Restaurant prices rose in comparison to last year due to the ‘Eat Out to Help Out’ scheme, which offered a 50% discount on meals up to £10 on Mondays, Tuesdays and Wednesdays throughout August 2020.

Also driving food price inflation last month were shortages of supply chain staff and increased shipping costs, coupled with demand increases following the lifting of national lockdowns.

In July, lower clothing and footwear prices contributed to a smaller rise in the cost of living.

“August saw the largest rise in annual inflation month-on-month since the series was introduced almost a quarter of a century ago,” said Jonathan Athow, deputy national statistician at the ONS.

“However, much of this is likely to be temporary as last year restaurant and cafe prices fell substantially due to the Eat Out to Help Out scheme, while this year prices rose.”

MPs warn of ‘disastrous’ impact of no-deal Brexit for UK food and drink industry

A parliamentary committee has warned that a no-deal Brexit would be ‘disastrous’ for food and drink firms in the UK, according to BBC News.

The Business, Energy and Industrial Strategy committee said leaving without a deal would have a ‘seismic impact’ and a free trade deal should be a top priority.

The UK’s food and drinks industry is the nation’s largest manufacturing sector, valued at £28.8bn and with 400,000 employees. Committee chair Rachel Reeves said: “The success of the industry has been highly dependent on participating in the [EU] single market and customs union.

“To ensure the continued success of our food and drinks industry, the government must provide clarity and certainty on our future relationship with the EU and seek continued regulatory, standards, and trading alignment with the EU in the processed food and drink sector.”

Exports of UK processed foods such as chocolate, cheese, beef, pork and soft drinks would be impacted by leaving without a deal when the transition period is due to end in December 2020, according to the committee.

The MPs said that defaulting to World Trade Organization rules “would not be an acceptable outcome for the sector and would seriously jeopardise the competitiveness of UK exports.

“The government should also seek to replicate all existing EU trade deals with third countries, as they constitute our biggest export destinations.”

Chief executive of the Food and Drink Federation Ian Wright said the committee’s report was “an extremely valuable contribution to the debate about the UK’s future trading relationship with the EU.”

2 Sisters suspends operations in West Bromwich

The 2 Sisters Food Group has suspended operations at its West Midlands site following allegations of food safety breaches, according to BBC News.

The company, which is one of the UK’s largest chicken suppliers, has announced that its staff will be ‘appropriately retrained’ before it begins to supply customers again. The Food Standards Agency (FSA) is investigating the claims of poor standards at the site.

An undercover reporter working for The Guardian and ITV News claimed to have witnessed workers changing slaughter dates on crates of chicken, mixing meat of different ages, changing site codes and putting chicken back on the production line after dropping it on the floor.

Customers Marks & Spencer, Aldi, Lidl, and The Co-op have stopped taking deliveries from 2 Sisters while investigations are taking place. Additionally, Tesco and Sainsbury’s are looking into the allegations.

2 Sisters said that the FSA had visited its site in West Bromwich on a daily basis since the claims came to light and had failed to identify any breaches of food safety law.

The food company issued a statement saying: “We continue to work closely with the FSA and our customers throughout this period.”


Sainsbury’s reports growth in sales and market share in 2011

UK retailer J Sainsbury plc (LSE:SBRY) reported today a 6.8% increase in total sales for 2011 to GBP24.5bn and said that it outperformed the market and increased its market share.

Profit before tax fell 3.4% to GBP799m, but the company said that its underlying profit before tax showed an increase of 7.1% to GBP712m.

Over the course of the year Sainsbury’s saw its market share rise to 16.6%, which it said was the highest for nearly a decade.

Chief executive Justin King claimed that the company’s price perception on branded groceries is improving, driven by the introduction of Brand Match which reassures customers that they are paying either the same or less at Sainsbury’s for branded goods.

In addition to this, Sainsbury’s Taste the Difference and Basics brands are both performing well and the company reported that these products appear side-by-side in many shopping baskets, showing that customers are saving on some items while treating themselves on others.

The other side of the supermarket business, general merchandise and clothing, is continuing to grow faster than the food business and is gaining market share. The retailer is developing its store estate, expanding its ability to offer non-food ranges, and now has 161 stores selling its larger non-food offering, 22 more than last year.

Sainsbury’s is also opening more smaller stores and during 2011 the company met its target of opening new convenience stores at a rate of one to two a week, with 73 to new stores taking the total to 440.

Many consumers are continuing to do more of their shopping from home and online grocery orders now exceed 165,000 a week, with an annual turnover of around GBP800m which places Sainsbury’s second in the market.

Beyond the company’s core operations, the pharmacy business is being expanded and Sainsbury’s Bank had a good year, recording a 40% increase in pre-tax operating profit.

The board of directors has proposed a final dividend of GBP0.116 to make a full-year dividend of GBP0.161, up 6.6% from last year’s dividend of GBP0.151.

Food group Nestle in $11.85bn deal to acquire Pfizer’s infant nutrition unit

Swiss food group Nestle SA (VTX:NESN) is taking over the infant nutrition business of US pharmaceutical giant Pfizer Inc (NYSE:PFE) in a USD11.85bn (EUR8.9bn) deal, the two companies said on Monday.

Nestle’s chief executive, Paul Bulcke, said infant nutrition has always been core to the group’s business and with this addition it would widen its portfolio and expand its position in the global sector.

The business to be bought makes 85% of its sales in emerging markets, complementing perfectly Nestle’s own baby nutrition operations while serving its growth-focused strategy, the buyer said.

For Pfizer, which has been reviewing alternatives for the nutrition business, the divestment is in line with its goal to generate shareholders value, chairman and CEO Ian Read said, adding the group would use the funds to buy back shares or invest in other business development projects.

Pfizer Nutrition, whose revenues increased by annual 15% to USD2.1bn in 2011, has sales, product development, manufacturing and business centres in the US, Latin America, Europe, the Middle East, Africa and Asia.

Its portfolio includes everyday and speciality infant and toddler formulas, follow-on formulas, as well as maternal and adult nutrition products. Its employees in 60 countries will be taken on by Nestle pending consultations with work councils and unions.

Completion, subject to conditions including regulatory approvals, is expected in the first half of 2013.

Pfizer is being advised by Morgan Stanley & Co LLC, Centerview Advisors LLC, Skadden, Arps, Slate, Meagher & Flom LLP, Clifford Chance LLP and DLA Piper LLP.