Business

Surge costs are hard to swallow for the makers of the humble BLT

The price of a sandwich, a lunchtime staple eaten by millions across the UK every week, is poised to hit new highs as food costs soar along with labor, packaging and energy bills.

war in Ukraine and the rebalancing of supply chains following pandemic lockdowns means the prices of ingredients in one of Britain’s most popular sandwiches – the BLT (bacon, lettuce and tomato) – have risen by an average of 56 per cent since January 1, 2019, according to data compiled from by resource research group Mintec and the Financial Times.

This increase is led by a huge increase in the price of sunflower oil, of which Ukraine is a world exporter. But the prices of other ingredients are also skyrocketing: Wheat and tomatoes are each up 63 percent since the start of 2019, while the cost of lettuce is up nearly a quarter. Pork is the only ingredient that just stayed.

Grocery manufacturers and retailers say they have never seen their overall costs increase so rapidly. The sandwich, whose manufacture and distribution requires fresh ingredients, large factories, labor and fast, refrigerated transportation, is emblematic of the struggle they face.

The increase in the cost of lunch becomes another put a strain on consumers’ walletsas well as an added burden for manufacturers just as they begin to recover from the worst of Covid-19.

“Sandwiches are a barometer of the economy in that sense,” said Jim Winship, director of the British Sandwich and Food To Go Association, adding that record prices for key ingredients would push consumer spending on sandwiches to new heights.

Shaun Allen, chief executive of food procurement specialist Prestige Purchasing, warned that “a protracted conflict combined with long-term sanctions on the Russian economy could push inflation to levels not seen in a generation”.

Not only is Ukraine a major supplier of sunflower oil, but Russia and Ukraine together supply about a quarter of it wheat of the world, the main ingredient in bread. Sandwich makers are also struggling by far higher energy costs operating factories – some in the industry say they have doubled in recent months – and rising labor costs due to staff shortages and increases in the national living wage.

Winship said sandwich makers have also struggled with supply problems. During the cold spring months, growers struggle to heat polytunnels to grow fresh lettuce items. A truck drivers’ strike last month in Spain, a major exporter of tomatoes and lettuce, added to the challenges.

Small multi-line charts showing how the cost of ingredients for a BLT sandwich has increased

Pork is the only BLT ingredient to see a dramatic increase so far. In late 2021 and early 2022, European pig prices fell sharply after African swine fever in Germany prevented the country from exporting to China. In the UK, downward pressure was compounded by a resulting surplus of pigs on farms Labor shortages in slaughterhouses.

But prices have started to rise in recent weeks following a reduction in the size of European breeding herds. The increase was fueled by rising input costs, according to the National Pig Association, but has yet to impact pork prices.

Prices for packaging – which accounts for about 10 to 12 percent of the cost of producing a sandwich, according to Sam Page, managing director of sandwich maker Simply Lunch – have skyrocketed by about 25 percent. Simply Lunch is now charging retailers around £1.70 for a sandwich, around 30 per cent more than before Covid.

Kantar, the market data company, said the price of a pre-packaged consumer sandwich increased 8 percent in the 12 weeks ended Feb. 20 this year compared to the same period in 2020. Tesco, Co-op and Boots have increased the cost of their ‘meal deals’, which typically include a sandwich, a drink and a snack, by 5 to 16 per cent this year. Similar inflationary forces are at work with sandwiches made fresh on-site by companies like Pret A Manger.

According to Shore Capital analyst Clive Black, the worst price hikes are yet to reach consumers. But he warned: “Supply chains really cannot sustainably manage this cost inflation unless they pass it on [to consumers].”

Winship said manufacturers had “no choice” but to charge more for sandwiches: “I think there was resistance from retailers to price hikes at first, but I think everyone has now accepted that it’s inevitable and inevitable.”

Workers prepare sandwiches in an M&S store in 1955.
Workers prepare sandwiches at an M&S store in 1955. The finished sandwich has become a staple for British workers © Charles Hewitt/Picture Post/Hulton Archive/Getty Images

There are few ways to mitigate the cost crisis in a labor-intensive industry with tight margins and timeframes. It takes 17 people on the production line to make a BLT sandwich, and labor costs have increased between 5 percent and 25 percent, depending on the roll, according to Page.

“We are looking for ways to automate our work [but it] is quite limited due to the amount of raw materials we use and the delicacy of the product. It’s quite difficult to get a robot to put lettuce in a sandwich,” he said.

labor shortage have meant most manufacturers are likely to have suffered a 10 to 15 percent reduction in capacity, Black said.

Greencore, the UK’s largest sandwich maker, declined to comment on the details, but then-CEO Patrick Coveney recently stressed more limited ranges due to previous labor shortages in certain positions since these began last year.

Dan Silverston, chief executive of Soho Sandwich, which makes about 300,000 sandwiches a week, said the whole process is complex: “It’s a high-risk business – it’s not just about getting bread and putting something on it. It’s about yields, taste panels, monitoring allergens and working with supply chains to ensure a constant supply is maintained.”

The time of rising costs has come as demand for sandwiches recovers after the initial phase of the pandemic.

Marks and Spencer, which sells 100 million sandwiches a year, said demand had returned to pre-pandemic levels in March after a dramatic fall in sales during the early lockdowns. The retailer’s most popular flavor, the BLT is priced at £3.30 after the price was increased in 2020 due to rising pork costs.

Page said he’s concerned there’s a cap on how much people are willing to pay for a sandwich, which could cause them to expire. Meanwhile, the manufacturers can do little about it reduce the number of ingredients without consumers realizing a problem.

But Winship argued that despite inflationary pressures, past experience indicated that more expensive sandwiches could sell well in a tough economic environment.

“In times of recession we have seen that the premium segment of the market has actually grown. People don’t go to restaurants, they eat a good sandwich and stay at their desks,” he said.

Additional reporting from Chelsea Bruce-Lockhart

https://www.ft.com/content/1ec13ce3-ef63-430b-bf64-2b78022185b9 Surge costs are hard to swallow for the makers of the humble BLT

Adam Bradshaw

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