U.K. Food Price Inflation Will Probably Exceed 5%, Warns AB Foods 

(Bloomberg) --

Britain will be lucky to keep food price inflation under 5% next year as businesses grapple with rising energy, commodity and labor costs, according to the boss of Associated British Foods Plc. 

George Weston, chief executive officer of the conglomerate that spans sugar production to grocery, selling brands such as Twinings Tea and Kingsmill bread, said the U.K. will probably breach that level. 

“It is not just energy prices rising, it is everything: commodities, raw materials, transport and labor costs,” he said in a phone interview. “We have to pass through these cost increases to customers as we don’t have the same margin nor the same ability to reduce costs that we have in other parts of the business.”

Weston said rising energy costs are a real concern for companies, noting that if Associated British Foods didn’t have hedges in place it would have faced a tripling of energy bills. He said he hoped a milder winter would ease the natural gas shortage. 

Associated British Foods, which also owns budget clothing chain Primark, plans to absorb all the cost increases in that business, however. Rock-bottom prices are one of the key reasons Primark, which has no online arm, was able to rebound after months of lockdown as customers flocked to stores when they reopened. Most of the inflation in that business is a result of supply chain disruptions.

“At Primark, we have not passed any costs onto consumers and nor will we,” said Weston. “We have made savings where we can in our supply chain and store operations to mitigate most of the cost increases.” 

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