The finance director of Associated British Foods (ABF), which owns brands including Kingsmill, Ryvita and Silver Spoon, has warned wage increases will see prices fall slower than expected.
Eoin Tonge cautioned: “Labour inflation is going to keep inflation higher. You can’t get away from that. Food inflation will remain sticky because of labour inflation as well.”
He added that while food inflation would continue to slow down, it would “not be at the level that people would hope for” due to rises in the cost of labour.
Tonge’s concerns echo comments by Marks and Spencer and Tesco bosses who warned earlier this month that the new National Wage would lead to higher costs.
Last year CEO George Weston revealed food inflation could be over by Easter if there are no further global economic shocks, pointing out the commodities such as cereals and edible oils had already decreased.
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Tonge’s comments follow ABF delivering strong first quarter results, bolstered by international brands such as Twinings trading well across its key markets.
Sales at ABF’s grocery division edged up 1.8%, or 5.4% in constant currency, over the 16 weeks to 6 January as Ovaltine also notched up a “strong performance” in Western Europe.
ABF’s sugar segment also excelled, reaching £825 million in the first quarter, and representing a 13% change at constant currency. The company added, despite recent weather, it believe its sugar production will “still be significantly above last year”.
