Combatting the Food Inflation Crisis

The UK is currently grappling with a food inflation crisis – an issue that’s been at the forefront of household concerns and economic discussions alike for a long time now. A simple grocery run has families paying 19% more for food items than they did a year ago. This striking increase is not just affecting family budgets but is also stunting the country’s economic recovery and raising serious sustainability questions. The UK is not alone in facing this crisis; almost every country around the world is grabbling with these destructive problems.

In this edition of RedCloud Insights, we take a closer look at this pressing issue, peeling back the layers to understand the causes and implications. We’ll also introduce you to a path toward resolution – Open Commerce – a new way of buying and selling essential food items that can offset the impact of this crisis.

Join us as we navigate through the complexities of this challenge, looking for solutions that can positively reshape our future economy.

The Food Inflation Crisis in the UK: A Snapshot

The UK’s inflation rate has been a roller-coaster in recent years. But amid these fluctuations, one sector seems to be consistently on the rise – food prices. The food inflation rate is the highest it’s been since the 1970s. A grocery bill that used to come up to £50 a year ago is now likely closer to £60, reflecting a stark 19% increase in food prices.

While the overall inflation rate hovers around 10%, this spike in food prices is significant and cannot be overlooked. This effect is akin to a slow leak in a car tire. On its own, an additional £10 may not seem like much, but the compounding effect over time could significantly hamper the household finances. It’s predicted that between 2020 and 2023, households will have experienced an increase in food bills amounting to £1000 – a troubling prospect for any family budget.

This isn’t just a concern for households alone. The broader economy feels the impact as these higher costs potentially stunt economic recovery. Rising food costs can deter spending in other areas, slowing economic activity and growth.

 Whilst these figures come from the UK, they are symptomatic of a wider, deeper, global issue. Many of the same problems seen in the UK can also be seen in as diverse places as East London, South Africa and Londrina, Brazil.

So why are food prices rising at such an alarming rate?

The Root of the Problem: Broken Supply Chains and Middlemen

The reasons behind the steep food inflation are multi-layered, extending beyond the purview of simple supply-demand dynamics. Yes, unexpected global events, such as the Russian invasion of Ukraine, had nudged up the prices of wholesale food commodities prices, but those have long since fallen back. The more insidious issue is how our current food supply chain is structured.

Disruptions in food supply and disruption have led to increased costs in various parts of the food supply chain. Arla, the dairy farmers’ cooperative, reports costs rising by as much as 80% last year. But perhaps more pressing than these is the issue of the many intermediaries involved in getting food from the farm to the fork. This multi-step, multi-actor process inadvertently inflates the cost of food, as each intermediary along the way takes a cut. Add to this the impact of disrupted supply chains due to global events, and we have a system that is primed for high prices.

Despite their best intentions, the current traditional systems inadvertently contribute to the problem. Helen Dickinson, CEO of the British Retail Consortium, warns that while inflation is expected to ease later this year, “prices are likely to remain elevated as the higher costs throughout supply chains become baked in.” It’s clear that our current approach to food supply isn’t sustainable, economically, or socially.

 Combatting the Crisis with Open Commerce: The Way Forward

 Solving this crisis and reducing food prices can feel almost impossible, but we believe there’s a solution – Open Commerce. Open Commerce is a new way of trading that emphasizes openness, transparency and fair trading across the entire supply chain.

Open Commerce can revolutionise the current global supply chain system by cutting down on the number of intermediaries and promoting transparency, we can greatly reduce the costs embedded in the supply chain, which will invariably trickle down to the consumer.

study shows that stronger supply chains could save the UK economy alone a whopping £12 billion annually and even create 100,000 new jobs – Just imagine how many more jobs can be created across the entire globe!

Reducing the food inflation rate will also require building a more resilient global and local supply chain. Recent global events have tested the robustness of our supply chain, with an average of 34.3% of food and drink manufacturers reporting major disruptions. However, Open Commerce makes it possible to build a system that does not depend on single entities that can profit unfairly from the current distribution system but depends on a network of independent but coordinated participants.

In conclusion, it is time to pivot from traditional systems that inadvertently contribute to rising food prices and embrace innovative solutions that promise a way forward.