Ever since the horse meat scandal broke, much of the debate has focused on cost pressures on suppliers. But for one key ingredient - low-value beef used in some readymeals and burgers - raw material costs have actually fallen in recent months.
The cost of beef chuck - the cheap cut used to make mince - has slumped by 16%, from £5 to £4.20 a kilo over the past year [Mintec]. The fall cast doubt on the theory that rising beef costs had pushed suppliers to substitute beef for horsemeat, said guest editor and Sainsbury’s group commercial director Mike Coupe: “There is a lack of robustness to the argument that people have been forced by costs to use horse meat.”
While beef remains more expensive than horse meat, the lower cost of beef chuck makes a significant difference to the cost of a typical ready meal lasagne, of the sort at the heart of the horse meat scandal.
While palm kernel oil prices continue to move up on a month-on-month basis, the oil is still significantly cheaper than this time last year. Increased production in Malaysia - the world’s second-largest palm kernel oil producer - is the key driver behind the lower prices. At the end of December, palm kernel oil stocks in the country were up by 24% year-on-year.
Meanwhile, both cocoa butter and cocoa powder are correcting to more normal pricing levels. Cocoa powder prices in the UK are down 25.8% year-on-year as they continue to fall from the unusual peaks seen in mid-2011, while cocoa butter has increased by 71.1% over the past year, as prices return to normal after a dip in 2011.
Beef accounts for 15% to 25% of a typical lasagne’s content. Tomato paste and pasta also account for 15-25% each, but in cost per kilo terms, even the cheapest beef is at least five times more expensive than tomato paste, and almost 10 times pricier than pasta.
The only other significant ingredient is cheese, which accounts for about 5-10%. Although the cost of mild Cheddar has gone up by 3% since the start of the year, it remained virtually unchanged at £2.96 a kilo during 2012.
With these ingredients either down in cost or static, there was less incentive to substitute ingredients, claimed experts.
The reason for the fall in the cost of beef chuck is that more expensive cuts have risen. Beef sirloin has gone up from £8 a kilo in March to more than £8.50 a kilo before Christmas. “If premium cuts go up, the less premium cuts go down because sellers do not need to make so much money from them,” said Mintec’s James Hutchings.