Packaged-food firms are running out of room to raise prices

THE MARKET for packaged foods is a competitive one, where price rises by one firm risk pushing shoppers into the arms of rivals. Companies in the industry deal with soaring costs by hedging against spikes in commodity markets using forward contracts, reformulating products so they contain less of the pricier foodstuffs or, failing that, surreptitiously making packages a bit smaller while keeping the ticket price the same.Amid pandemic-related supply-chain bottlenecks, labour shortages and crop failures, food firms have repeatedly done all that. Even so, they have had to raise prices, . The invasion of Ukraine, known as Europe’s breadbasket thanks to its rich soil, by Russia, the world’s top exporter of wheat, is forcing their hand once again. Together the two countries account for 29% of international wheat sales and nearly 80% of sales of sunflower oil. Disruptions to those critical supplies are pushing up food companies’ costs just as energy costs are also sky-high as a result of the war.