Food inflation puts processors and restaurants in ‘survivor’ position

Scottish food processing and service companies are caught between soaring costs and cash-strapped consumers, cutting back in ways many thought unthinkable before last year’s double-digit inflation took hold. there is

“Everyone is in survival mode,” says Gordon Allan. Together with his brother James, he runs the family-run Malcolm Allan, one of Scotland’s leading food brands, making sausages, haggis, steak pies, black puddings and hamburgers since 1954.

With an annual turnover of around £15m, the company has evolved from its roots as a street butcher to supplying its products via major supermarkets. But the company maintained its “difference” as a processor of whole animals, becoming one of the last independents to buy direct from farms and auctions across the country.

Herald Scotland:

That was until a £900,000 annual electricity bill hike forced Malcolm Allan to close his logging plant in Larbert last December. The dozen or so staff working there are located elsewhere in the country. workThe company’s total workforce has fallen by 60 over the past year to 108.

At Mercat Grill outside Musselburgh, owner Graham Blakey wrestles with price and quantity for a new menu that considers high prices. energy and labor costsand waves of repeated price increases from suppliers.

“Some suppliers don’t even tell us that their prices have gone up, and I don’t like that,” he said.

“I don’t really care what people say to me, so I can fight it. [and] Be careful with that. When you’re busy running your business, you don’t always have your eye on individual items. ”

read more: A sharp and furious price increase makes menu headaches

Brykey, who also heads the Scottish Licensed Trade Association (SLTA), said gross profit margins had fallen to unsustainable levels despite raising some prices in January. The results of his latest inventory survey will determine his “true status.”

“My wine supplier usually raises prices once a year, and this year is probably the third,” he said. “This shows that people have to adapt quickly to the costs. Of course, this month there were higher gas prices, higher minimum wages and other pay increases.”

It’s a similar story with Stephen Montgomery at Our Place Annan in Dumfriesshire, which opened last June.

“If you just look at the increase in food, the average is about 48 percent,” he says. “But we can’t just count food growth in the amount we give to consumers, because we have to consider everything.

Herald Scotland: Gordon Allan of Scottish Butcher Malcolm AllanScottish Butcher Gordon Allan Malcolm Allan (Image: Malcolm Allan)

“We could transfer some of it, but not all of it. There is a limit to how much you can charge for steak, mac & cheese, pizza, and what people can play with is Because there are limits.”

On the retail side, big supermarkets are also taking some of the consumer hit from inflation, but overall profits are still substantial.

Market leader Tesco reported: Profit down 51% to £1bn Sainsbury’s pre-tax profit for the year ending Feb. 25 was £690m down 5% Morrisons, which was surpassed by discounter Aldi in September to become Britain’s fourth largest grocery chain, reported a 15% decline in underlying profit to £828m in the year to 30 October. .

But both Sainsbury’s and Tesco have come under fire after being attacked by the consumer group “Which?” Less than 1% of the time, he found, convenience stores have affordable products that consumers are increasingly seeking. In comparison, he’s 87% at larger stores.

read more: High food prices ‘stick’ as shoppers seek to ease inflation

“Despite the fact that many Scots across the country are skipping meals and using food banks, the big supermarket chains have few products in the essential price range in convenience stores, so they cannot go to the hypermarkets. Our research shows that people do not have access to affordable food.” Which? Policy director Sue Davis said.

“Everyone should have access to affordable, nutritious food wherever they live. Why is this? We want to ensure that it is available in all stores, including most convenience stores, and that pricing is clear and easy to compare.”

Back in Larbert, Allan described the chain of events that led to the closure of the meatpacking plant.

Herald Scotland: Malcolm Allan's current facility in Larbert to open in 2014Malcolm Allan’s current facility in Larbert opened in 2014 (Image: Malcolm Allan)

The decision was prompted by Malcolm Allan’s annual electricity bill increase from £300,000 to £1.2m in January 2022. To raise this money, the company sold all £500,000 of its ‘buffer stock’ which is used when open market prices are high.

Without such setbacks, the company has streamlined to using only 5-6 cuts of meat instead of using whole animals.

“What everyone has done throughout Europe is sell stock, and whether you buy pork from the Danes or pork from the Italians, whatever you buy, the stock in the cold store is It’s all gone,” he said. “We don’t have any in stock, so it’s a supply and demand situation right now.

“Scotch beef is at a record high, pork prices are up 30% in six weeks, this is just mental. But that’s it. Everyone had to do the same to pay the energy prices. .”

Tomorrow: In the final day of the series, we examine potential solutions to the food price crisis.

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