Analysts at Rabobank expect food price inflation in the Netherlands to rise to between 5% and 10% next year. The impact of energy prices is currently limited mainly to higher diesel and packaging costs, but persistently high oil and gas prices will force food producers to raise their selling prices towards 2027. For companies in the food industry, it will be a challenging task to raise their prices without losing volume or eroding margins.
High oil and gas prices are currently having only a limited impact on food producers. Transport costs are rising, however, as hauliers are passing on the higher diesel prices almost immediately. Packaging is also becoming more expensive. However, raw material stocks and forward contracts are mitigating the worst of the impact. This will change if high energy prices persist, as is expected.
Producers are currently absorbing the higher diesel and packaging costs largely at the expense of their profit margins. However, a price increase of more than 40% and 60% respectively for average oil and gas prices is unsustainable for many food producers. As a result, high energy prices will become a key issue in the price negotiations for 2027.
The upcoming price negotiations between food producers and buyers from food retailers and foodservice operators will once again be fiercely contested. This is partly because these parties are themselves facing cost increases due to rising energy costs and the increase in the minimum youth wage from 1 January 2027. But it is mainly due to consumer reaction, according to analysts at Rabobank.
Food prices in the Netherlands have risen by an average of 33% compared with early 2021. Consumers have mainly responded by switching to cheaper retail channels or products, such as own-brand goods and special offers. The macroeconomic outlook gives little reason to expect that consumers will simply accept a further series of price rises.
Rabobank believes that prices will even fall slightly in 2027, partly as a result of gradually rising unemployment and an expected decline in purchasing power. Over the next twelve to eighteen months, it will therefore be a major challenge for all players in the food industry to strike the right balance between raising consumer prices, maintaining volumes and protecting margins.
