Europe adapts to rising price of basic foods

A loaf of bread is 19% higher in a year, the most on record

VERDELOT, France — Since Russia’s invasion of Ukraine, the price of the wheat that Julien Bourgeois grinds for boulangeries at his family’s flour mill in central France has increased more than 30%. The bill for the electricity needed to run the mill has tripled. Even the price of paper used for flour sacks has hit the stratosphere.

All of which are driving up the price of a loaf of bread.

“Inflation is brutally high,” said Bourgeois, inspecting the mill’s mammoth crushers as they ground wheat into flour. He has urged the 1,000 bakeries that his company, Moulins Bourgeois, supplies to mark up the iconic French baguette by 10 cents, from a current range of one euro to 1.30 euros or $1.27, to offset the higher costs that he has had to pass along.

“Consumers can afford to pay more for now, but prices will keep rising,” Bourgeois said. “It’s worrisome.” In France, where baguettes already cost over 8% more than they did a year ago, he added, “we remember that the revolution started over the price of bread.”

As inflation continues to flare across Europe, few matters are causing more concern than the cost of a basic loaf. Prices for the most essential food staple have never been higher, and are now up nearly 19% from a year ago, the fastest rise on record, Eurostat, Europe’s statistics agency, said in a report released Wednesday.

Russia’s war in Ukraine has been a major factor behind the increase, Eurostat said, by roiling energy markets and driving up prices for grains, oilseeds and fertilizers.

That has contributed to a broader sticker shock for food and other necessities that is rapidly draining consumers’ wallets. In Europe, consumer prices rose at a rapid pace in September from a year ago, climbing 10.1% in Britain and by nearly 11% across the European Union. The cost of food jumped by nearly 16% in the EU and more than 14% in Britain, while energy prices surged by around 40% across both.

High consumer prices are a concern in the United States as well. The pace of inflation, near a four-decade high, remains elevated even as the Federal Reserve has tried to cool the economy. Even there, the price of bread has jumped 15% from

year ago.

The broad nature of inflation is feeding into the anxiety of policymakers and economists that price rises are becoming embedded and will prove harder to contain.

Food companies are passing along higher costs. Last week, the global food giant Nestle said it had raised prices 9.5% in the third quarter compared to the same period last year, up from a 7.7% increase in the previous quarter.

When the price of bread rises, people feel it right away. The squeeze has been sharpest in countries nearest to the conflict zone, especially Hungary, where the cost of a basic loaf surged in September by 77% from a year ago, according to Eurostat. In Croatia, Estonia, Latvia, Lithuania, Poland and Slovakia, bread prices are up over 30%.

The whirlwind has come as a shock in Germany, where the cost of bread has shot up over 18% in a year, as overall inflation has zoomed into the double digits, too, reaching 10.9% in September.

Fine Bagels, a bakery in Berlin, recently raised prices for its New York-style bagels from $1.08 to $1.17 in U.S. dollars, and not without considerable angst, said Alice Zuza, an employee.

“There was a debate at the bakery,” Zuza said. “The owners didn’t want to raise prices, but, in the end, we didn’t have a choice.”

Russia’s willingness to use energy as a weapon against countries supporting Ukraine has inflamed problems by raising gas and electricity costs for flour suppliers. Bills are also soaring for energy-dependent businesses, including thousands of industrial and craft bakeries that run ovens most of the day.

In the Netherlands, a phalanx of bakeries have gone out of business since the end of summer as energy costs have soared. Bakeries in Belgium are raising prices, but 1 in 10 has been forced to shutter, with more closures expected before the end of the year.

At Velzelio Duona, an artisanal bakery in northern Lithuania, Vaidas Baranauskas has tried to avoid a similar fate. His loaves of traditional rye, made with his grandmother’s recipe, are especially prized. This year, he pushed up prices 33%, to as much as $11.75 a loaf, to offset a jump in the cost of flour, sunflower oil and sugar. The price of dried fruits and seeds used in some breads has doubled.

To curb energy bills, Baranauskas covered his roof with solar panels. But as winter approaches and the skies darken earlier, he is having to buy electricity at prices that are 500% higher than a year ago. He and his six employees now run the ovens four days a week, instead of five, to save money.

“Nothing like this has ever happened before,” Baranauskas said. “It is a hard time when a lot of companies will have to choose if it is relevant to proceed with their production.”

Industrial bakeries aren’t immune. Major European supermarkets that sell huge quantities of bread have tried to keep prices artificially low to lure clients by haggling with suppliers over how much they pay for ingredients and energy. But stubbornly high costs forced many to mark up prices.

Inflation is also adding to the cost of running a business in Europe by prompting workers, who are trying to make ends meet as their living costs spike, to demand higher wages.

Attila Pecsi, the owner of Aran Bakery, in the popular 7th District of Budapest, said he had raised the salaries of his 30 employees twice this year. Payroll expenses account for around half the cost of a loaf of bread. Raw materials and energy constitute another third.

With expenses climbing, Pecsi has raised bread prices 12% since January. He is planning another increase before the end of the year. And consumers expect more to come, he said.

That is because prices are unlikely to retreat, said Johan Sanders, the president of Fedima, the European federation of bakery suppliers.

“This is the first time in many years that we’ve seen inflationary effects in staple foods,” Sanders said. “It’s daunting because it’s there to stay, and it will be difficult to deflate prices.”

Bourgeois of the flour mill outside Paris was preparing for just that situation. Russia’s war had already prevented Ukraine’s farmers from planting a full crop for 2023, he noted. “Our fortunes are very linked to the war,” he said. “If it keeps up, then cereal prices will stay high for a long time.”

Moulin Bourgeois’ production costs have jumped 30% in a year. Bourgeois spends countless hours managing the economics of his business, which started as a single water-wheel-powered stone mill set up by his great-grandfather in 1895 and is now an automated operation with 18 silos, across 6 acres, able to grind 450 tons of wheat a day.

Recently, he sent a somber letter to the 1,000 bakeries he serves. “Dear clients,” it began. “Never has the price of commodities and energy been as high as it is today. We are obliged to raise our prices on Nov. 1. We encourage you to raise your prices to make up the difference — 10 cents per baguette is reasonable.”

At a popular boulangerie in the leafy village of Crecy-la-Chapelle, 40 minutes north of Bourgeois’ mills, the owners, Serge and Marie Pinguet, were trying to postpone that fateful day.

The couple aren’t raising baguette prices for now, out of fear that even loyal clients might turn to supermarkets. But they are increasing the price for croissants and patisserie to make up the difference.

“Prices are changing so fast,” said Serge Pinguet, who comes in at 2 a.m. every day to start making bread dough for the morning rush. The cost of butter doubled in one year, to $11.75 for 2.2 pounds, he said, while sugar now costs 30% more. Pinguet now pays $76.30 for a carton of 360 eggs, up from $39.

While the sacred baguette is still affordable, he said, “all commodities have risen, so prices will keep going up, not just this year but probably for the next two to three.”

“And when prices rise too much, people won’t be able to buy,” Pinguet said. “It’s a vicious circle.”