Campbell raises prices as material costs begin to bite
help compensate for higher packaging and raw material costs.
The price increase represents an approximate 4.8 per cent weighted average price increase across Campbell's US Soup, Sauces and Beverages segment. During the past four years, the company said it has made significant investments in the business unit, including new products and more convenient packaging such as easy-open lids.
Higher raw material and packaging costs have hit the whole industry, and similar price hikes have been carried out by a number of other manufacturers such as Hershey Foods and General Mills.
Price increases for key raw materials threaten to increase further over the next 12 months as low global stocks remain open to unexpected disruptions. Wheat and corn inventories for example are still exceptionally low, with the US government recently predicting that global wheat stocks-to-use ratio will rise by just four days to 86 days of cover in 2004/05 - the second lowest global inventory in 30 years.
Packaging costs have also rocketed. The price of benzene, which is used to make styrene, has now reached historically high levels. Prices have been rising steadily since the start of the year, and are now double what they were six months ago.
All this means that polyethylene (PE) and polystyrene producers now have the highest feedstock costs in the plastics producing world.
Campbell's decision to increase prices follows attempts by the firm to achieve greater production efficiency. Optiva global product lifecycle management (PLM) software from Formation Systems was recently installed, marking a significant update of the company's product development systems.
Campbell says that Optiva will allow it to replace obsolete PLM tools, automate workflows, improve sourcing and qualification processes and enable the group to rapidly implement new work processes. PLM software is increasingly being used in the food processing industry. Indeed there is growing consensus that food manufacturers will have to utilise cutting edge technology more in the future if they wish to remain competitive.
Campbell Soup Company is a global manufacturer and marketer of high quality soup, sauce, beverage, biscuit, confectionery and prepared food products with nearly $7 billion in annual sales and a portfolio of more than 20 market-leading brands.
