“Food companies ranging from processors, to manufacturers, to restaurants need to prepare now for how volatile agricultural prices will impact their earnings,” says Mark Robson, Oliver Wyman partner and co-author.
The study forecasts that it will be difficult for food companies to pass on most of this cost to consumers given the sluggish economic recovery. As a result, higher wheat prices could put a significant strain on food companies’ working capital and margins. They could also drive more consumers to purchase less-expensive substitutes like private-label products.
The new Oliver Wyman study:
- Predicts that sharp shifts in agricultural prices across the board will continue
- Notes that the frequency of agricultural shocks is rising with the number of extreme weather events
- Argues that food companies need to devote more resources to managing price shifts in key ingredients
- Provides five key recommendations for how companies can better cope with severe agricultural price swings