Kraft feels the pressure of rising energy and packaging costs

By Peter Stiff

- Last updated on GMT

Related tags: Costs, Cost, Peak oil, Kraft foods

Kraft Foods has confirmed that it is increasing prices of many of
its products in the United States by an average of 3.9 per cent
because of rising energy and packaging costs caused by higher
global oil prices.

Retailers were informed of the changes, most of which are immediate, via a memo that was sent last week.

Kraft has stated that it will not discuss the specifics of price changes, however it has said that cookies and crackers will be amongst the products affected.

Oil prices are currently posing problems for food manufacturers world wide due to the impact on plastics used for packaging and fuel used for transportation. Crude oil prices were above $57 a barrel yesterday.

The announcement follows the company's third quarter results last month. The food giant saw earnings drop 13.5 per cent. This resulted in a 11 per cent cut to its full year earnings forecast, with higher energy, packaging and general commodity costs cited as the reason.

Kraft said its energy and commodity costs rose by $200 million in the third quarter, with costs for the year up by $600 million.

In particular rising costs of PET resin, used in plastic packaging, was up substantially. Plastic-related costs are Kraft's second largest expense after cheese.

A Kraft UK spokes person told BakeryandSnacks.com​ that "costs are a challenge and we expect this to continue."

However this price increase relates solely to the US."

Kraft is not the first company to be effected.

Last month Danone identified the price of plastic, used for packaging its products, as affecting operating margins. It stated it had taken a 'severe hit' from input costs.

Cadbury Schweppes has also said high oil prices will have a negative affected on its third quarter results, with external cost pressures for the second half of the year reaching £20-25 million.

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