Food Manufacturers Face Serious Inflation Concerns


Food Manufacturers Face Serious Inflation Concerns

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Among the soaring national debt and upcoming presidential selections, another key concern for food manufacturing suppliers and wholesalers is the looming cloud that is inflation when it comes to the American dollar.

In a national survey of U.S. manufacturing chief financial officers and senior controllers conducted by Grant Thornton LLP, the U.S. member firm of Grant Thornton International Ltd., there are serious concerns about inflation, as 66 percent say their company intends to raise the sales price for their goods over the next six months, up from 35 percent six months earlier. “This was to be expected given the increase in commodity raw material costs experienced by most manufacturers over the past 12 months” said Wally Gruenes, Grant Thornton’s national managing partner for Consumer and Industrial Products. “With the precipitous increase in these commodity prices in recent months, manufacturers have no choice but to pass along such increases to their customers. While they have done a good job of improving operational efficiencies and driving down costs over the past three years, manufacturers simply could not drive down their conversion costs enough to absorb these raw material price increases.”

Regarding the Japan disaster, 90 percent say it will impact the U.S. economy and most believe that Japan will not fully recover for 1-3 years.

Grant Thornton LLP conducted the biannual national survey from March 22 through April 6, with 318 U.S. CFOs and senior controllers participating, of which 50 were from manufacturing companies.

Over the next six months, do you expect the U.S. economy to:

October 2010 April 2011
Improve 29% 41%
Remain the same 58% 43%
Get worse 13% 16%

 

Over the next six months, do you expect your company’s financial prospects to:

October 2010 April 2011
Improve 35% 58%
Remain the same 55% 32%
Get worse 10% 10%

Over the next six months, do you expect prices or fees charged by your company to:

October 2010 April 2011
Increase 35% 66%
Remain the same 60% 34%
Decrease 5% 0%

 

Over the next six months, do you expect your headcount to:

October 2010 April 2011
Increase 18% 47%
Remain the same 60% 39%
Decrease 22% 14%

Are you concerned about a double-dip recession?

October 2010 April 2011
Yes 64% 65%
No 36% 35%

 

How long do you think it will take the Japanese economy to recover fully from the recent earthquake and tsunami?

Less than a year 4%
1-3 years 46%
3-5 years 34%
Longer than 5 years 14%
Don’t know 2%

Do you believe that the U.S. economy will be impacted by the situation in Japan?

Greatly impacted 10%
Somewhat impacted 80%
No impact 10%

 

About which type(s) of pricing pressure are you most concerned? (You may select more than one.)

October 2010 April 2011
Raw materials (e.g., cotton, metals, petroleum-based product) 62% 96%
Energy 33% 58%
Employee benefits 80% 58%
Company insurance (not including health care) 6% 2%
Other 2% 10%

 

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