As food processors, our raw material costs are normally a large fraction of our total cost of production.
There is no arguing the fact that the cost of many raw materials are rising. The reasons for these are numerous including the:
- changeable weather experienced world wide
- the increase in the crude oil price and therefore the cost of transport
- the effect of biofuels on the availability of cereals and oil seeds
- the effect of biofuels on land allocation – ie land previously used for ingredients being allocated to biofuel crop production
The question is what can the food processor do about this? In a theoretical way we could:
- increase our price, but we also need to think how that effects our customers
- look for cheaper ingredients or change ingredients but then need to think of what that will do to our quality
- change our production to higher value added, high margin products
- increase our material yield figures by reducing our losses
As I say that’s all very theoretical – I would be interested to hear from you (email me here) with your thoughts and experience.