Upfield - comment

Further press reports on lower food inflation, with the FT citing “softening” butter prices due to a reduction in dairy producers’ costs. In Germany, prices are down 30% since the end of FY22, but the German market is not typical of other European markets with retail prices in Germany negotiated every few weeks as opposed to annual or semi-annual negotiations in other jurisdictions.

Although there is pressure from retailers to pass on the lower production costs, on a regional level there is less room to do so than the German data suggests as in other markets prices weren’t negotiated up as quickly in the first place. We have already included some price reduction in our model and are not increasing our assumptions as for the reasons above we don’t expect such large swings in achieved price reductions overall.