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Inflation hit a new 30-year high last month as prices continued to climb despite the traditional January sales.
Consumer prices increased 5.5% in January, compared with 5.4% in December, figures released by the Office for National Statistics (ONS) showed this morning.
It’s the highest reading of the consumer prices index since March 1992, when it stood at 7.1%, and well above the Bank of England’s 2% target rate.
The Bank warned prices would continue to climb to a predicted peak of more than 7% by April when the energy price cap is lifted and household fuel bills rocket.
The ONS highlighted rises in clothing and footwear prices as a contributing factor to January’s increase, along with furniture and household goods.
Grocery prices also contributed last month, with food and non-alcoholic drink rising by 4.3%, compared with 4.2% in December.
Despite running below the headline inflation rate of 5.5%, it is the largest increase for food and drink since September 2013.
All food and drink categories were more expensive than a year ago: prices of oils and fats are 15.9% higher, fruit is up 6.9% and coffee, tea and cocoa rose by 4.9%.
Average petrol prices were also 145.1p per litre in January 2022, compared with 116.6p a year ago. However, prices at the pump had softened a little against record highs seen at the end of 2021.
ONS chief economist Grant Fitzner said: “Clothing and footwear pushed inflation up this month and although there were still the traditional price drops, it was the smallest January fall since 1990, with fewer sales than last year.”
Food and Drink Federation CEO Karen Betts said the continuing rise in food and drink prices was “worrying”, particularly for lower income households.
“Food and drink manufacturers are working hard to keep prices down but are being hit hard by rising energy, ingredient and logistics costs, which for the moment show no signs of abating, alongside dealing with acute labour shortages,” she added.
“It’s becoming increasingly difficult for companies - large and small - to remain competitive and upcoming regulation is compounding the situation. This puts a premium on good collaboration between government and industry to guarantee that planned regulation is successful and does not place unnecessary burdens on businesses at an already challenging time.”
Morning update
Heineken has bounced back from the Covid crisis with revenues soaring in 2021, but the brewing giant warned beer demand could be hit this year as it was forced to raise prices to deal with inflation.
The Dutch group revealed 12.2% organic growth in revenues to €26.6bn last year as pubs and bars reopened across the world as Covid restrictions started to end.
Consolidated beer volumes rose by 4.6% and by 17.4% for the Heineken brand, which was “well ahead” of pre-pandemic levels.
It contributed to a 43.8% jump in operating profits to €3.4bn.
Heineken didn’t break down exact price rises in 2021, but its underlying price-mix was up 7.1%, accelerating in the second half of the year.
CEO Dolf van den Brink said Heineken had delivered “a strong set of results” in a challenging and fast-changing environment.
“We made a big step towards recovering to pre-pandemic levels, and in parts going beyond.”
However, the group warned it expected to be “significantly impacted” by inflation and supply chain resilience pressures in 2022.
“More specifically, we expect our input cost per hectolitre to increase in the mid-teens given our hedged positions and the sharp increase in the prices of commodities, energy, and freight.
“We will offset these input cost increases through pricing in absolute terms, which may lead to softer beer consumption.”
Revenues at Coke bottle Coca-Cola Europacific Partners have fizzed higher thanks to higher priced and consumers drinking more outside the home following lifting of lockdown restrictions.
CEO Damian Gammell said 2021 had been “an extraordinary year” for the group but warned price rises were still needed in 2022 to managed higher input costs.
Sales in 2021 jumped 7.5% to €13.8bn despite a slower uplift for volumes, which increased by 4.5% during the year. The recovery for the soft drinks market gathered momentum throughout the year, with sales growth of 8.5% in the final quarter.
When including the impact of the acquisition of Australian bottler Coca-Cola Amatil, revenues for the year increased by 30%.
Operating profits increased 23.5% to €1.9bn, driven by higher sales and ongoing efficiency programmes.
Gammell said: “Solid top-line recovery, value share gains, operating margin expansion and remarkable free cashflow generation demonstrate our strong performance in a challenging environment. Our results also reflect the successful acquisition and integration of Coca-Cola Amatil, a fantastic business to have acquired at the right time, as we look forward to an even brighter future together.”
He added: “In the near-term, we expect to see further volume and mix recovery whilst managing our key levers of pricing, promotional spend and driving efficiencies across our business, collectively with the aim of mitigating inflationary pressures.”
Revenues at Kerry Group have risen 5.7% to €7.4bn thanks to an 8% uplift in volumes and increased pricing of 1.2%.
Its taste and nutrition division registered a volume rise of 8.3%, while volumes at the consumer foods arm increased 6%.
Group trading profit increased 9.8% to €875.5m as margins expanded by 40 base percentage points driven by the ecovery of operating leverage, portfolio mix and net contribution of acquisitions and disposals.
CEO Edmond Scanlon said the group had ended the year on “a strong note with excellent growth”.
“While recognising that current market environment and inflationary pressures continue to present challenges across our industry, Kerry is stronger positioned and more resilient than ever as we enter a new strategic cycle. Our earnings guidance range for 2022 reflects the group’s strong growth prospects and the net effect of recent portfolio developments.”
Drinks ingredient maker Treatt has appointed Ryan Govender as CFO.
He joins the company as CFO designate on 23 May for a handover period, succeeding outgoing CFO Richard Hope on 1 July.
Govender has worked for over 20 years in senior finance roles across global FMCG businesses, particularly in the food sector.
For the past 12 years he has been working at Associated British Foods, most recently as CFO of SPI Pharma. Before that he held finance and management roles within other ABF businesses, including Speedibake, Germains Seed Technology and Illovo Sugar.
Treatt CEO Daemmon Reeve said: “It’s fantastic to have Ryan joining our team at Treatt. His significant international experience in FMCG businesses will be extremely valuable, as we continue to benefit from a number of prevailing consumer trends across our categories. I’m confident Ryan will fit in well as we further our investment in both people and infrastructure to drive our next chapter of growth.”
The FTSE 100 continued to make gains this morning, climbing 0.2% to 7,620.32pts.
Shares in Heineken rose 1.3% to €96.50, jumped by 2.4% to €110.15 at Kerry Group, but dropped by 0.6% to €50.38 for Coca-Cola Europacific Partners.
Elsewhere, Real Good Food is up 10.2% to 2.7p, McColl’s Retail Group is up 5.9% to 7.4p, Nichols is up 3.9% to 1,521.7p and Parsely Box is up 3.3% to 31p.
Early fallers included Delivery Hero, down 5.3% to €47.31, Bakkavor Group, down 3.6% to 122.8p, and Ocado Group, down 2.9% to 1,324.5p.
Yesterday in the City
The FTSE 100 bounced back yesterday, rising 1% to 7,608.92pts.
Delivery Hero surged back following the dramatic 30% plunge last week when investors worried over cautious forward-looking estimates. The firm rose 15.1% to €49.82 yesrterday.
McColl’s Retail Group also jumped 11.1% to 7p, with HelloFresh up 7.3% to €51.50 and Bakkavor Group up 5.3% to 127.4p.
Science in Sport was among the fallers, down 2.6% to 57p, AG Barr fell 1.9% to 507p, Parsley Box was down 1.6% to 30p and Premier Foods fell 1.4% to 114p.
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