The Grocer – Inflation wiping out transport margins as energy costs bite

The Grocer – Inflation wiping out transport margins as energy costs bite

22 Nov 2022 Posted By Paul Mummery

Food supply chain and logistics operators have warned of the knock-on effects of the rise in inflationary pressures, which have “wiped” transport margins and forced them to reduce trading days.The rise in fuel and energy costs has taken such a toll on supply chain companies that they had taken extreme measures – such as cutting lines or reducing the number of trading hours or days, according to The Grocer.

RHA’s Paul Mummery told them “spiralling fuel and energy costs” were taking a “massive” toll on hauliers, many of whom were already operating on “paper-thin margins. These rises are unsustainable for many if they can’t pass them on,” he said.

“This is why we’re calling on ministers to announce a minimum 15 pence per litre fuel duty rebate for transport operators to reduce the cost of moving goods and ease inflation.”

Margins wiped out

RHA member Oakland International – which provides retail distribution into UK and Ireland retailer depots for chilled and selected ambient products – said its fuel costs had risen by over 20% in recent months, which has “effectively more than wiped out any margin made on transport operations”.

Their energy-intensive operations have seen energy costs doubling in just eight months, which has had “a major impact on margins” as well, it said.

“We have invested heavily in renewables, which has helped marginally this year and we have agreed to more than double our solar PV energy production in 2023 to head off at least some of the further increases expected over the winter and into spring,” said CEO Dean Attwell.

“We feel that there is going to have to be an electricity cost escalator mechanism applied to our sector in the same way as there is a fuel escalator for transport.”

The Office for National Statistics reported that foodservice operators were more likely than any other industry to cut trading by at least two days a week to reduce energy costs.

They were also the most likely to plan to reduce trading hours, even if still operating for the same number of days.

Both the RHA and the British Frozen Food Federation have called on the government to extend the energy support being given to food businesses beyond the end of March.

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