NL residents may soon pay more for groceries

Food manufacturers like Unilever and Procter & Gamble are increasing their prices, as the prices for raw materials and transportation skyrocket. While supermarkets are still trying to cover those costs in-house, Netherlands consumers will eventually feel it in their grocery bills, analysts said to Financieele Dagblad.

With the hardest coronavirus lockdowns seemingly over for the time being, and the global economy reopening, demands of all kinds of products and services spiked quite suddenly. And that resulted in a spike in prices for raw materials. In May, the price of dairy, sugar and oils saw the biggest increase in more than a decade. According tot he United Nations food price index, world food prices were 40 percent higher in May than the previous year.

Prices for packaging and transport also increased significantly. The price for sending a sea container from Shanghai to Rotterdam, for example, is now between 2 and 5 times higher than a year ago, according to FD.

This has forced food manufacturers to hike prices. There is no escaping it, Unilever CEO Alan Jope said when presenting the company's half-year figures. The higher costs affect all Unilever products. The food group already increased its prices in the first two quarters of this year, and expect further increases in the second half of 2021. "We will have to deal with higher costs and prices at least until the beginning of next year," Jope said.

And while Dutch supermarkets are still keeping their prices unchanged - both Jumbo and Vomar cited competition reasons to FD - that is unsustainable, analysts said to the newspaper.

"Ultimately, 80 percent to 90 percent of cost inflation is passed on to shops and therefore to consumers. How much companies can pass on depends on the type of product and the brand. But the inflation is so high that it is clear they have to pass on something," Bernstein analyst Vincent Lee said.

ING sector economist Thijs Geijer is also convinced consumers will bear at least part of this increase, but added that it may take some time for consumers to feel it. "Producers and supermarkets will first have to come to new price agreements. Because they often do not take effect immediately, you see the price increases reflected in the store with a delay."