Last year, the UK’s top 150 food manufacturers successfully passed on £1.3bn, mainly in commodity price inflation, to the supermarkets who nonetheless managed to add billions to their own profits.
Despite a 3.3% hike in commodity prices over the period, average profit margins at the suppliers rose 0.3% or £0.3bn, while the retailers grew their margins 5.2% or £2.5bn, according to data compiled by OC&C for The Grocer.
The figures suggest consumers were the biggest losers from the commodity price rises OC&C estimated the retailers passed on £4bn to shoppers.
The consultancy suggested better management of commodity inflation helped retailers and suppliers deliver higher margins. However, a surge in the price of commodities at the end of 2010 led to pressure at the start of 2011, with operating margins slipping 0.9 percentage points among the suppliers publishing first-half results.
It emerged this week, that Mars UK’s margins were hit in 2010 as prices of key ingredients such as cocoa soared. Pre-tax profits fell 23% in the year to January 2011, despite sales rising 1.9%. Even excluding exceptionals, operating profits were down 9%.