Cost pressures throughout the supply chain, from the rising costs of many ingredients to escalating shipping and freight costs, are squeezing the profit margins of food manufacturers in the specialty food industry. With the costs of shipping doubling, tripling, quadrupling or more, makers have had little choice but to raise their own prices. Many manufacturers report holding the line on price increases as much as possible, but eventually it becomes financially untenable to operate without passing the increased costs of doing business along to retailers, restaurants, and consumers.
SFA News Daily spoke with Jenny Wieser of Fischer & Wieser Specialty Foods; Cara Figgins of Partners, A Tasteful Choice Company, and Chris Muir of Wild Hibiscus Flower Co. about the cost pressures they face. Following is what they said:
Jenny Wieser, owner, Fischer & Wieser Specialty Foods, Fredericksburg, Texas
As specialty food manufacturers, we are all producing premium products, and now the raw materials are at mega-premium prices. We have certain ingredients that have increased in price between 250 and 400 percent. We use a lot of raspberries, the prices have just been insane, and all packaging is up between 50 and 100 percent.
We bring packaging in from overseas, and loads from overseas 12-15 months ago were $4,000-$5,000, and now we have seen them rise as high as $25,000-$28,000. We’re in Texas, and freight from California that used to cost $3,000 now costs $6,500 and sometimes even $7,000.
The problem for us as specialty food manufacturers is we are already selling at a pretty high price, so there is no way that any of us are going to come to par with what we were last year in terms of gross profits.
We are getting ready to implement our second price increase, and I have talked to many colleagues who are on their third or fourth. None of us are ever going to catch up. It’s simply going to be impossible, because we can’t pass through the kinds of price increases that we are seeing, and still expect to sell product.
So, we are just trying to keep prices at a level that will allow us to weather the storm, while certainly not putting as much money to the bottom line as we once had. We are hoping things will turn around in freight costs, because freight is driving a lot of this.
Cara Figgins, president, Partners, a Tasteful Choice Company, Des Moines, Washington
I think a lot of companies were trying to wait and see before raising prices, then we saw this whole series of price increases, because everyone realized, “OK, this isn’t going away anytime soon.”
For a little while, we thought we could absorb it, but then after awhile, you just can’t do that anymore. We have had three increases this year on the price we pay for packaging material, and the price of flour is up 76 percent.
Also, one of the things we’ve seen is that price increases have been bigger than normal, and more frequent than normal. We think there are going to be ongoing price increases for awhile, because everyone’s got to get back on track, and everyone’s in the hole.
We just did one price increase, and we are going to evaluate pricing pretty regularly going forward, because the environment has been so volatile. Nobody likes it. I don’t like it as a grocery shopper.
What will probably end up happening, I think, is that we are going to start seeing a lot more promotions, once prices settle down. No store that has managed to get $4.49 from a customer is going to lower their price back down to $3.99. It just doesn’t happen. What will probably happen is that we as suppliers will start doing more aggressive promotions as the supply chain levels.
Chris Muir, manager, North American Operations, Wild Hibiscus Flower Co., Richford, Vermont
We are an international, vertically integrated company, and we have had increases in shipping costs from farm to production, and then from production to market. We’ve seen international shipping costs up 500-560 percent.
Then, we’ve seen warehousing and logistics up 60 percent since 2019, just to get from warehouse to market. That’s just the reality for the whole market—the cost of doing business has risen so much in the last two years.
Like any specialty item, there’s a fine line. We did, I believe, have the grace of the consumer, or the restaurant owners, because specialty items are a bit unique and different, and it’s not a commodity, so it’s at a slightly higher price point. However, there’s always that point where it’s priced too high, and the restaurant owner doesn’t want to buy it. We’ve only applied price increases where we’ve absolutely had to, and it’s only a few products. It hasn’t, we believe, priced them out of the market, however. It usually comes right back to the ingredient cost, and the costs associated with ingredients. If it was $4,000 to ship a container to production, and now it’s $27,000 or $30,0000, eventually there’s a breaking point.
We have adjusted in some ways. We might have been doing multiple 20-foot containers from farm, and now we do 40-footers, because of the cost savings, per ounce per ingredient. Like so many others, we have looked at the situation and seen where we can adjust. A lot of it comes back to the shipping lines. If there is more stability in the supply chain, and if there’s a bit more oversight of what’s going on in the shipping supply chain, I think we’ll see a lot calmer waters in the coming years.
Editor's Note: Are you a food maker who's had to raise prices? Join the conversation here at the specialtyfood.com Community Hub.
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