The Rising Cost of Ingredients

As food processors, our raw material costs are normally a large fraction of our total cost of production.

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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.

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