Surging fuel prices will make food costlier, lead to fewer deliveries in remote areas: FWD

Rapidly increasing fuel cost will eventually be passed on to consumers through hikes in food prices, Federation of Wholesale Distributors (FWD) chief has said.

Surging fuel prices are piling on top of other pressures on shops including labour shortages, retailers said.

With fuel prices hitting record levels, the trade body for UK wholesalers has told the BBC that its members will pass on increased transportation costs to their food shops and restaurant customers, who will in turn pass on those costs to consumers.

“Food price inflation is already happening, but this is going to make it worse, because there’ll be charges passed on to customers and then obviously to end users as well,” said James Bielby, chief executive of FWD.

“So, people buying food and drink in shops, when they’re eating out, will be paying more because the cost of distributing those goods to the outlet has gone up so much.”

Fuel prices are rising amid fears of a global economic shock from Russia’s invasion of Ukraine. Oil touched 14-year-highest level this week before slipping slightly.

“If you’re distributing goods around the network, fuel costs will be 25 percent to 30 percent of your distribution costs,” Bielby continued.

“Those wholesalers who are buying on what’s known as the spot market are seeing their costs go up by as much as 50 percent per litre. So it’s a huge impact, and that then leads to a surcharge on customers.”

He said some larger businesses who had hedged, or bought their fuel in advance, weren’t yet as affected, but were likely to feel the impact when current contracts came to an end.

“When you’re thinking about all of the other pressures in the supply chain which have been going on for the last two years and beyond, it makes it really, really difficult.

“And that ultimately means that consumers are having to spend more on food and drink at a time when their energy bills are going up, at a time when the cost of living is going up hugely.”

Bielby said that if prices remained high, operators which bought fuel on the spot would also choose to fill up tanks only partially, for cashflow reasons. This could mean some harder-to-reach areas would be supplied less frequently.

“So if they get deliveries every other day, that might go to once a week. This would mean the choice and range of products they get will go down.

“That would be typically be areas at the end of the distribution line, so rural communities or coastal towns,” he said.

Many wholesalers had already been bracing for added costs from April, when they would no longer be allowed to use cheaper red diesel to run their refrigeration units or freezers, he added.