Everyone is getting “a bit poorer”, is the message from Klaas Knot, president of De Nederlandsche Bank (DNB), to the Netherlands. The central bank expects inflation to reach 6.7 percent this year, the highest rate since 1981 and more than double compared to last year. 6.7 percent inflation is also a lot higher than the estimate of the CPB from just a week ago, which came in at 5.2 percent.
“For companies, it will mainly mean that they will be confronted with cost increases,” says Knot. Inflation will hit particularly hard in the chemical industry, greenhouse horticulture, the food industry, livestock farming and the poultry sector, according to an analysis by ABN AMRO.
But who is going to pay for this, the producer, the buyer or the customer? This is being negotiated vigorously in various sectors.
‘Layers slaughtered earlier’
“Egg farmers bring their laying hens to slaughter earlier because feed prices have risen too fast to keep them alive,” says Bart-Jan Oplaat, chairman of the Association of Poultry Farmers. As a result, they miss Easter, which is normally the most profitable time of the year for poultry farmers, according to the sector association.
Rising costs are partly offset, according to most contracts in the sector. “But then we are talking about fluctuations of 5 percent. We are now dealing with a 30 percent increase in feed costs.”
Prices in the paper industry are also rising quickly, says Corneel Lambregts of trade association Koninklijke VNP: “We are dealing with a doubling of our costs. This is mainly due to energy. Once that was 10 percent of our costs, now it is 50 percent .” This has already led to a temporary production stop for a single producer.
And the food industry is also struggling with the higher costs of energy and raw materials. “We are confronted daily with further price increases in logistics, packaging and raw materials”, says Maarten Elsinga, CEO of Zwanenberg Food Group. Recently, the manufacturer of sausages and soup, among other things, announced that one of the five locations will be closed to save costs.
“As a company, we cannot bear the price increases and that is why we are holding talks with customers again to raise the prices.”
Strong Negotiations
Albert Heijn says it has increased the contract price of eggs, but does not mention an amount. Jumbo now pays customers 0.9 cents more per egg. This compensates for the increased costs for poultry farmers, says Rabobank, to which most poultry farmers are affiliated. But this is not enough for this profession.
“Perhaps this is good enough for the increases that have taken place so far”, responds the Association of Poultry Farmers. “But we are only at the beginning. If things continue like this, our costs will double again in the next three months. Then farmers will collapse.”
In addition, the increase in the contract price only applies to eggs sold in supermarkets. About half of the eggs are supplied to the industry, according to Rabobank, and the negotiations have not yet resulted in a higher compensation per egg.
Or does the consumer pay?
The consumer is at the very end of the chain. If buyers such as supermarkets pay higher costs, they can pay for them themselves or have the customer pay more.
“If their purchasing costs rise so much that their profit margin is compromised, that is an important driver to pass those costs on to the consumer.” Given the fierce competition in the supermarket sector, Geijer does not expect this passing on to be unreasonable.
This calculation is already visible everywhere in the store. According to Statistics Netherlands, bread and grains were 4 percent more expensive in February than a year earlier. A price increase of more than 5 percent applies to eggs. “An above-average price increase,” says Geijer. “And that without the developments in Ukraine.”
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