Princes has imposed a minimum 5% price rise across all its branded and own-label products on the back of “unprecedented cost pressures” stemming from the Iran war.
A letter to its customers, seen by The Grocer, said the conflict in the Middle East had caused “severe disruption” to global energy markets and supply chains.
“The closure of the Strait of Hormuz – a critical corridor for approximately 20% of the world’s oil and gas – is generating unprecedented cost pressures across the entire food and drink industry,” the letter, from Princes commercial chief Giuseppe Mastrolia and dated 20 March, said.
“These pressures are affecting every stage of our supply chain, from raw material sourcing and manufacturing to packaging and distribution.”
Princes claimed it faced a 50-60% increase in energy and fuel prices, 40-120% in shipping, logistics and insurance costs, 10-25% in raw materials and packaging and 20-40% in agricultural inputs and fertilisers.
As a result of the “extraordinary circumstances”, Princes told its customers prices for all finished products would rise by a minimum of 5% on 1 April. It gave retailers nine working days’ notice for the cost price increase request – compared with a customary 12-week negotiation period.
Princes said the adjustment reflected “only a portion of the total cost increase” facing the group.
“Princes Group has taken the decision to absorb a significant share of the impact internally, in order to support our customers and protect the long-term value of our partnership,” the letter added.
“We will continue to monitor the situation closely and keep you informed of any further developments.”
The Grocer understands the CPI is not a blanket rise across the group’s entire customer base, but Princes declined to give further details.
A spokeswoman for Princes Group said: “The conflict in Iran has significantly disrupted the global oil supply and driven up fuel and shipping costs across all our markets.
“Like every food manufacturer, we are facing substantial cost increases across our supply chain. Where those costs are unavoidable and material, we act to recover them. We remain committed to working transparently with our customers and to keeping food affordable. We will only pass on inflation where we absolutely have to.”
Liverpool-headquartered group is owned by Italy’s New Princes. It floated on the London Stock Exchange in October last year with a valuation of £1.2bn, which was at the bottom of its predicted range.
Princes will report its first full-year set of results as a listed company tomorrow.
In November, it revealed revenues in the nine months to 30 September fell 6% to £1.4bn as a result of lower average selling prices. The group said, at the time, deflationary pricing conditions across several core raw materials hurt its top line given the pass-through mechanics with customers.
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