Better off to offer premium lines, says analyst

A moderate but sustained increase in wheat and corn commodity prices from now until 2015 has been suggested in a new report from Euromonitor.

However, the analysts predict that manufacturers focusing on premium and private label lines will offset rising input costs.

“Food manufacturers offering high added value bakery and cereal lines will be in a far better position to pass on price increases to consumers. This is because premium consumers show higher elasticity to prices than those in the mass market/mainstream,” said Francisco Redruello, Euromonitor International’s senior food analyst.

“In addition, private label bakery manufacturers will be in a relatively good position to internalise some of the commodity-induced price increases through economies of scale linked to mass production.”

The analyst stresses though that those manufacturers that occupy a space in between the premium and economy price bracket will be the most heavily affected by prospects of food commodity inflation in the medium term and thus, accordingly, will have to adjust their sourcing strategies the most.