The Wall Street Journal this morning reports that a number of manufacturers – including Dean Foods, Wrigley, Sara Lee, and McCormick – are struggling to maintain their profit margins in the face of rising raw materials costs.
The Journal writes that “several factors are driving up ingredient costs. A growing middle class in Latin America and Asia can afford more meat and milk, driving up demand for grain to feed cattle and hogs. Demand for grain-derived ethanol, driven by government incentives, has helped push up corn and soybean prices. And a drought in Australia last year reduced the supply of milk available to Asia.
“High grain and soybean prices have raised the cost of the many products derived from those crops, including oils and high-fructose corn syrup, a sweetener used in everything from soft drinks to ketchup.”
The Journal writes that “several factors are driving up ingredient costs. A growing middle class in Latin America and Asia can afford more meat and milk, driving up demand for grain to feed cattle and hogs. Demand for grain-derived ethanol, driven by government incentives, has helped push up corn and soybean prices. And a drought in Australia last year reduced the supply of milk available to Asia.
“High grain and soybean prices have raised the cost of the many products derived from those crops, including oils and high-fructose corn syrup, a sweetener used in everything from soft drinks to ketchup.”
- KC's View:
- It will be interesting to see how these shifts affect consumer behavior and the economy in general. Will price become even more important to shoppers, with value-driven stores such as Wal-Mart taking on an even larger role in the American consciousness? And how will this impact companies such as Whole Foods that have tied themselves to the notion that people have disposable income and are willing to spend it on upscale food products?
