Bearing the cost of fuel price hikes

As oil prices soar, the garden industry is concerned about who will absorb the extra cost.

Oil prices have rocketed this autumn. This has obvious knock-on effects for garden retail. But who will bear the cost of the price rises in fuel? With the ongoing debate in horticulture over who covers the cost of increased overheads, opinion is split about who will pay - consumers or suppliers.

Midland Regional Growers group haulier Rick White Ltd director Thomas Stracey said last month that extra fuel costs will be passed on to growers (HW, 4 October). But Cumbria-based peat producer Humax managing director Jonathan Cox said his haulier had added a fuel surcharge of 10 per cent over the past six months, which will be passed on to the consumers.

Garden Industry Manufacturers' Association (GIMA) director Neil Gow says the suppliers he represents will have to absorb the price rises because retailers are obsessed with keeping ticket prices down. He believes the retailers "have got their heads in the sand". "They're hell bent their margins should increase and certainly not decrease. But where's this extra going to come from?

"The big retailers are so fixated with holding prices down because that's the only benefit they offer the consumer.

"If supermarket prices go up you just pay it. I know food is essential but people could buy cheaper food - but they don't. Grain price rises force bread prices up. There's a peat shortage after the wet summer so that should go up £1 a bag. But it won't.

"Prices don't need to be cheaper than six years ago. People have more money in their pockets than ever. In the retail industry the only point of difference the multiples have left is price - but not everybody can be the cheapest."

Bulky items such as compost could be hardest hit. Peat, turf and even plants may be subject to 10 per cent cost increases next spring.

Retail director Simon Edwards of the Golden Acres Garden Centre & Nursery Group, which runs four retail nurseries on the south coast, agrees that compost is the most likely product to go up in price: "Low-volume, high-value goods such as compost will rise. A pallet is worth a few hundred quid and you only get 22 on a lorry. There's not very much value with that."

He adds: "This has to mean price rises eventually. It's not just the transport but also the plastics and everything we use because oil prices directly impact on that. It's going to have to go up eventually but it depends on how long suppliers hold on to extra costs. Potentially, some plant (prices) could go up too, though not so much because of the high value of plants pro rata."

Another retailer view comes from Somerset-based Sanders GardenWorld managing director Peter Burks. He says: "Anything that gets delivered could go up, although because the dollar is going the other way furniture from China will be OK.

"But for plants from this country, I would be very surprised if we can carry on supplying them at the same price when you've got to haul them around the country. The same is also true of compost, which is a bulky, low-value product."

He believes garden centres may put up with wholesale price rises if they are gently introduced.

Burks says consumer spend may fall this spring because of fuel costs: "Fuel prices at pumps are a very obvious thing and they might affect our trade for a while. People will not tootle around so much because fuel is so expensive. But after a few weeks they'll get used to it and things will return to normal."

Garden centre consultant Andy Campbell says many garden products are too cheap and, like Gow, he believes the fuel price rises will give retailers a chance to sell for higher prices.

"Plants, in particular, are still incredibly good value compared with many other consumer goods. A bunch of flowers can cost £10, but there is a reluctance to pay that money for a three-litre shrub that will give years of pleasure."

But he says fuel price increases won't have much of an influence on what gardeners pay for their plants and peat at the end of the day because "retailers simply won't entertain it".

Gow says one GIMA member, who does not want to be named, is looking beyond the big chain retailers, such as B&Q and Wyevale, and says: "The good news for retailers is that now consumers are increasingly seeking 'authenticity' in everything they part with cash for - be it locally produced food or real cashmere. This means that they can stop worrying about the big multiples completely, because no matter how hard they try the big multiple brands cannot be 'authentic'. Authenticity can't be bought."

PETROL PRICES

Higher petrol prices accounted for almost all of a rise in consumer price inflation from 1.8 per cent in September to 2.1 per cent in October.

Fuel prices for road users rose 12.1 per cent year on year. A 2p tax rise and higher oil prices pushed the average price of a litre of unleaded petrol up by 2.7p to 97.2p in October, the Office for National Statistics found.

That rose to 101.2p by mid-November, according to petrol price data collecting company Catalist. This could lead to a 0.1-0.2 per cent rise in the consumer price index in November. Crude oil prices have gone up by more than 25 per cent in sterling terms since the start of July. Catalist predicts petrol could hit 110p a litre if oil refiners lift their margins to previous levels.

The Road Haulage Association says a typical British 44-tonne truck doing 100,000 miles a year is now paying £15,000 more in duty, which "must be passed on to consumers" (source: Daily Telegraph, 10 November).

HW found growers' transport costs are likely to rise as the Government raises fuel prices (HW, 4 October).


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