Higher Prices forecast for 2023 by the Food and Beverage Industry

 

By Stewart Brennan

Nestle, one of the major corporations within the food and beverage industry has just confirmed price increases on their products as a result of inflation; (See Here [01] and Here [02]) Just one of the many serious topics I wrote about in my second book (The Activist Poet Vol 2) [03] in 2021.

In fact, Unilever, Coca-Cola, Heineken, Colgate-Palmolive and Procter & Gamble among others have also mentioned that there will be further increases in the prices of their products in 2023, as they navigate the destructive nature of inflation and growth economics to maintain dividend payouts to share holders.

In my book, I used the food and beverage industry as an example of the hidden dangers of growth economics due to the nature of our economic system. Growth is exponential for corporations which becomes parasitic, as inflation and market profit taking eventually consumes everything to their ultimate destruction.

Here is an excerpt from my book that explains the exponential nature of corporate growth.

From “The Activist Poet Volume 2”:

“The greatest shortcomings of the human race, is our “inability” to understand the exponential function.” ~ Dr. Albert Bartlett

Below is a real example of what happens when a corporation has usurped its market but still requires growth to hedge off its rising costs and potential bankruptcy. However, keep in mind that corporate survival also requires a steady supply of energy and so energy must always be available for a corporation to continue its growth.

Inflation and Growth within the food industry

As population continues to grow, the demand for food and energy also increases. But the energy needed (Oil & Gas) to help meet these demands are not an infinite resource and therefore cannot continue to increase forever. At some point supply will not be able to meet demand. In a normal world this would not be a sudden thing, but a gradual decline depending on demand.

However, the way our economic system is set up, corporations require a constant growth or their rising overhead costs eventually overtake their profits and send the company into debt, which if not remedied, will send the company into bankruptcy.

Corporations compete in their markets with other corporations to secure as much of the market share as possible. During this corporate war there are winners and losers. The losers either go bankrupt and fade away, or are consumed in consolidation or merger agreements. Eventually there are only a few big players left in the market and so they then find themselves not only bigger but with a much larger task to feed its constant growth requirements. Failure to do so begins a timeline of collapse.

The only options left for a company to feed its growth requirement once it has overtaken its market is to tighten its belt via lean business practices for efficiency including employee reductions if not done already, or to increase the cost for its products, reduce the portion size of the product or expand acquisitions into different industry markets. However, taking the last option of expanding into different markets only prolongs the inevitable, as growth even then is required. It becomes a vicious cycle that is, over all, parasitic to the entire system because there’s no safe plateau or off switch. Something must perish to ensure the continued growth of the corporate entity.

The Food and Beverage Industry is by far one of the largest industries in the world. One only has to look at some of the biggest players to see the truth of what growth economics has created through consolidation of their own markets and expansion into other markets. Tyson Foods, Nestle, Mars Inc, JBS, Kraft Heinz, Smithfield Foods, Unilever, General Mills, Kellogg, Coca Cola, PepsiCo, AB InBev, SYSCO, Cargill, George Weston Ltd, and others are multi conglomerates as a result.

The companies that own and control the Food & Beverage Industry are in a vicious growth cycle that threatens millions of people in North America alone. Competition is all but gone as many of the brand names have been consolidated by a few mega corporations and these companies require constant growth to maintain their bottom lines.

Some of the things that affect corporate bottom lines are of course energy costs, raw material inflation, increased feed costs, crop damage, and stock market profit taking. An increase in operation costs is mostly generated by the nature of our economic system which demands growth.

Although the function of these corporations within the system seems stable in 2021, they are really quite vulnerable, it doesn’t take much to cause a disruption in supply lines when a company becomes that size. The COVID operation has certainly put everything to the test and although people bought more quick foods and beverages, a corporation requires time to plan and increase its capacity so “Just in Time” shipments for swings or runs on buying, is not possible which can lead to disruption in supply lines. But also, when materials and supplies to produce are delayed or not available.

Today in 2021, when going into a grocery store, if you look around, you’ll notice that there are fewer and fewer products on the shelves than ten, twenty and thirty years ago. Many have been thinned out over the years, removing variety as the competition was swallowed up and discontinued, while portion sizes on the brands that remain have been getting smaller and smaller (25% to 30% each shot) while the prices have jumped 25% to 30% each time there is a fluctuation in the corporation’s bottom line since the 2008 market crash.

When looking back to the 1980’s, 1990’s, and in some cases even to the decade before the 2008 market crash, variety was present, portion sizes were bigger, and costs were much lower, yet the number of independent companies were more numerous, their margins were smaller, and their values were in the millions. Whereas today, most of those companies have consolidated or merged into mega corporations with valuations in the tens of billions, to hundreds of billions of dollars and of course they have huge economic and political power.

Change must come in the way our banking and economic system works so that the need for constant growth is eliminated and the costs of everything remain stable without inflation.

Capitalism and socialism will not work with the economic growth model in place because growth, which is exponential, meets with problems in supply and demand of finite resources. The entire system then becomes vulnerable to collapse.

We absolutely DO need to make a change, but it will have to be a 21st century sustainable socialism that we need to move to, and for that to happen, the current unsustainable economic system must end. When it does, that will be the moment we either evolve or perish. Change won’t happen overnight, there’s a transition period we need to go through to bring about change. The length of time that the transition lasts will depend on education, freedom of speech, freedom of information and cooperation.

Here is a lesson that explains how growth is an exponential function [04] given by Dr. Albert Bartlett which truly helps clear up any confusion about what the systems economic growth equation does to everything our economic system touches.

Sustainability 101 - Exponential Growth - Arithmetic, Population and Energy

2023 is going to be a painful year around the world as food insecurity begins to gather momentum due to rising fuel prices and market profit taking that drives inflation and consumer prices higher.
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LINKS:

[01] Nestle Full Year Results 2022
[02] Nestle Food Prices Grim Forecast
[03] The Activist Poet Volume 2
[04] Sustainability 101 - Exponential Growth - Arithmetic, Population and Energy