Consumer giants say global food crisis likely by end of the year

A global food crisis triggered by Russia’s invasion of Ukraine is likely to materialise by the end of this year, the leaders of some of the largest food companies in the world have warned.

Chief executives from a host of global food brands said they expected food prices to rise even further, with some executives claiming over a billion people are facing serious food shortages in 2023 and 2024.

“We’re at the foothills of a very substantial global food crisis,” Alan Jope, chief executive of Unilever, warned at a conference in Dublin last week.

The boss of the Anglo-Dutch consumer goods giant, which owns brands such as Knorr, Hellmann’s, HB Ice Cream and Ben & Jerry’s, said the world had not yet experienced the full impact of the emerging food crisis caused by the war in Ukraine.

“We’ve come through Covid and then a war broke out in Europe. We’ve now got inflation at a level that I don't think anybody in the food industry has had to deal with before in their professional careers. And I think global inflation is going to remain at these levels,” Jope said.

“Of course, the mother of all crises is the climate emergency, which is going to impact in all sorts of economic and social ways. So I think we should all get used to the idea of a state of crisis being more or less the new normal.”

The warning comes as the world food price index measured by the UN Food and Agriculture Organisation (FAO) has risen to record levels already this year. In March, the FAO food price index hit an all-time high of 159.7, although it has dipped slightly in the last two months to 157.4 in May.

The sharp rise in commodity food prices so far this year has been driven by higher prices for almost all foods in the last year, particularly vegetable oils (up 30 per cent), grains (up 30 per cent) and dairy (up 17 per cent).

Tobias Wasmuht, chief executive of the Dutch supermarket chain Spar, said the company was engaging in its second round of negotiations with suppliers for price increases in the last 12 months.

“In the fourth quarter of 2021 we saw a huge surge in food prices coming from our suppliers on the back of the supply chain crisis and the breakdown of logistics systems, and that was before the war in Ukraine. That has all changed and we’ve seen another surge in food prices that has driven the FAO food price index to record highs,” Wasmuht said.

“We’re now on the second round of negotiations with our suppliers and the pressure is constant. We’re doing what we can to mitigate the impact of this by taking costs out of our business and looking to be more efficient where we can. But ultimately we’re in a situation where food price increases are going to continue, which is why food inflation is running at 7 per cent across the EU.”

Both Jope and Wasmuht were speaking at the Consumer Goods Forum, which was held in Dublin last week. The three-day event included speakers from some of the world’s largest consumer brands, such as Coca-Cola, Unilever, Pepsico, L’Oreal, GSK, Walmart and Tesco.

New research conducted by McKinsey, the consultancy, and presented at the conference showed more than FAO food price index hit an all-time high are deemed to be living in countries that are “highly vulnerable” to the food security issues caused by the war in Ukraine. Clarisse Magnin, the managing partner of McKinsey in France, said the countries most vulnerable to food shortages were predominantly in Africa, Asia and the Middle East.

“When you analyse those countries, they don’t have sufficient domestic food production, they have no buffer stocks of food and it’s also the case they have the least ability to pay for essential food commodities at higher market prices,” Magnin said.

“We basically have issues at every single step of the food value chain. Some of the problems are in Ukraine, some are in Russia and some of the problems are in the other bread baskets of the world. The biggest problem is with the Black Sea ports, which are all blocked up due to the war. The consequences of what’s happening in Ukraine will start to materialise in the fourth quarter of this year, and they will be pretty massive from all the scenarios we’ve been running.”

She said the loss of grain exports from the Black Sea region this year and next year could not be offset by increased crop exports from other large cereal growing regions of the world, and that “trade-offs” would have to be made on the use of grains around the world.

“I do hope as a human being and as a businessperson there will be a balanced distribution of the available grains in the world, because otherwise it will only amplify the situation where the poorest countries in the world get less of what’s available,” Magnin said.