Mr Kipling’s exceedingly costly cakes
But don’t blame him... it’s all the fault of pound’s Brexit plunge, says food giant
SHOPPERS are being forced to pay up to 25 per cent more for some of the country’s favourite foods after a post-Brexit price surge, The Mail on Sunday has found.
Mr Kipling and Cadbury cakes are among the products made by Premier Foods that now cost more – and retail experts warn there is worse to come.
The increases are being blamed on Brexit as the pound’s fall in value brings higher costs and hits the company’s profits.
Mr Kipling Cherry Bakewells and Cadbury Milk Chocolate Cake Bars have increased by 10 per cent to £1.60 in several major supermarkets. A Cadbury Triple Choc Roll has risen by a similar amount to £1.65. Other Cadbury products, which are manufactured on licence from the confectionery giant’s US owner, have also risen.
A Flake Celebration Cake was £8 but now costs £9 in most stores and as much as £10 in Morrisons – a 25 per cent hike. Butterscotch Angel Delight has increased from 40p to 50p in Asda.
Bird’s Custard Powder is £1.15 in many supermarkets compared with £1.10 before – a 5 per cent rise. Other favourite ranges such as Ambrosia, Bisto and Sharwood’s are also affected.
Supermarkets bosses have repeatedly pledged to resist price rises caused by the fall in the pound. But food retail expert Steve Dresser said: ‘Until now I think people have struggled to say what prices are going up despite all the talk about the effects of the drop in the value of the pound.
‘But retailers and their suppliers are reaching the end of their financial years, have looked at supplier contracts and have clearly had some difficult conversations about cost increases.’
One supermarket negotiator, who asked to remain anonymous, said: ‘We’re moving into a period of inflation and something has to give. Some rises are being absorbed and others will be passed on to the consumer. Different supermarkets might choose to make different decisions about that.
‘Shoppers might switch or wait in the hope things will be discounted, but these are now the choices people are going to have to make.’
Premier Foods accounts for well over £1 billion of supermarket sales annually in Britain and boasts that its products are bought by 95 per cent of British households.
It is understood Premier has asked supermarkets for increases of between 5 per cent and 8 per cent on some lines. However, many of these items were being sold at well below the recommended price, so they have soared as retailers ditch the deep discounts.
Mr Dresser said: ‘It’s a nightmare. People have almost forgotten how much things cost because products such as Mr Kipling are sold so much on discount to get volume and market share. But, in a way, it is good this is being dealt with. Customers will begin to get a better idea of what is a realistic price.’
He added that the price of some goods had fallen recently, particularly for seasonal salads, which are being picked in Britain as warmer weather arrives. Poor weather forced firms to import many products in the spring.
Premier Foods called the price increases a ‘last resort’, adding: ‘This is not across the board and is very much dependent on the category. We are looking at different ways to manage this, utilising a number of levers.’ It said commodity price rises including sugar, chocolate, dairy, wheat and palm oil had also led to rises.
One senior supermarket source said: ‘Normally, currency contracts insulate us from temporary drops in the pound for up to nine months – all big retail firms use them. But they are not designed for these kind of shocks. Shoppers will become more aware of these changes, especially on branded goods, over the coming weeks and months.’
Experts say increases on other products are also on the way. Lord Wolfson, chief executive at Next, said clothing prices are rising.
‘There will be more rises in the coming months’
HOUSEHOLDS are facing a fresh squeeze on their budgets as official inflation figures due this week are expected to show prices rising at their fastest rate since 2013.
Higher vehicle taxes, energy price rises and the Brexit blow of a weaker pound have all contributed to the pressure on consumers. Economists are warning that wage rises may already be lagging behind prices – making households poorer in real terms.
The official data will follow hard on the heels of the latest revelations of rising shop prices reported in The Mail on Sunday this weekend, with a raft of price increases from Premier Foods, the maker of such national favourites as Mr Kipling cakes and Ambrosia custard.
City forecasters expect the Office for National Statistics to say on Tuesday that the official measure of annual inflation – the Consumer Prices Index (CPI) – rose 2.7 per cent in April, up from 2.3 per cent in March. Samuel Tombs, chief UK economist at consultancy Pantheon Macroeconomics, said the difference in the timing of Easter (April this year, March last year) meant price rises associated with Easter breaks will only show up now.
‘Several utility companies increased prices in April too, which will boost inflation,’ he added.
Reforms to vehicle excise duty will mean consumers paid slightly more on average on new cars bought and registered from April 1.
Tombs also said: ‘Retailers are continuing to adjust prices upwards in response to sterling’s fall.’
Households have faced price rises across a range of imported products since late last year, prompted by the dramatic collapse in sterling following the Brexit referendum.
As well as facing price increases on a range of Premier Foods products, consumers have suffered rises on a number of other popular grocery products in recent months including Marmite, Birds Eye fishfingers and Walkers crisps.
The ONS is expected to say that the previous official measure of annual inflation, the Retail Prices Index (RPI), rose by 3.4 per cent in April, after an increase of 3.1 per cent in March. This is still used in some cases, so regulated rail fares will rise next year by July’s RPI.
The latest rises come in the wake of a fresh warning of a consumer squeeze from Bank of England Governor Mark Carney, though he said the Bank believed inflation would ease off eventually.
‘Every household situation is different. It will be challenging this year, but high inflation is temporary,’ he said last week at the launch of the Bank’s inflation report.
Wages are for the moment rising faster than prices, according to comparison of the growth in the three months to February. Economists use the three-month averages to measure the trend as it is less volatile. Headline pay growth including bonuses in the three months to February 2017 was 2.3per cent, compared with price growth of 1.9 per cent.
Figures for pay growth for April will not be available for another month, but economists believe a squeeze has already begun.
Howard Archer, chief UK economist for consultancy IHS Global Insight, said: ‘I suspect that when you look back, inflation will have been higher than earnings growth for the three months to April.’
Archer now expects inflation to peak at 3 per cent this year, not 3.3 per cent, as weakening economic growth damps demand. Price rises will drop away in 2017, he said.
Consultancy Capital Economics said in a note to clients that it expects April’s CPI to be 2.8 per cent: ‘CPI inflation looks set to have taken a big jump up in April. Thereafter, however, we don’t think inflation has too much further to rise.’
Patrick Minford, professor of applied economics at Cardiff Business School, expects households to see their pay increase towards the end of this year. He said: ‘We did expect a squeeze on real wages. There is some wage pressure building, and shortages of labour will start to hit next year or later this year.’
The Bank of England says that its forecasts are based on a smooth Brexit transition, with an agreement settled before March 2019 on a future trading arrangement and transitional arrangements in place before a new deal is implemented.
The Bank now expects slightly slower economic growth this year than it last forecast, with Gross Domestic Product (GDP) 0.1 percentage points lower at 1.9 per cent in 2017, and 1.7 per cent in 2018, as greater foreign trade and investment offset lower domestic spending. But David Meier, an economist at Swiss bank Julius Baer, said the Bank was being bullish.
‘With the Brexit talks between the European Union and UK yet to begin and creating economic uncertainty, in particular for cross-border relations, we think it is very optimistic to bet on increases in trade and investments,’ he said.
Retail sales figures could offset some of the gloom this week, with a 2 per cent rebound expected by Capital Economics this month.
‘The 1.8 per cent monthly drop in volumes in March added to the evidence that the consumer spending slowdown is gathering pace. But surveys point to a recovery in high street spending in April.’