Bread Prices Skyrocket as Inflation Grips Europe

Bread Prices Skyrocket as Inflation Grips Europe

Since Russia’s invasion of Ukraine, the price of the wheat that Julien Bourgeois grinds for bakeries at his family’s flour mill in central France has increased more than 30 percent. The bill for the electricity needed to run the mill has tripled. Even the price of paper used for flour sacks has hit the stratosphere.

All of which are driving up the price of a loaf of bread.

“Inflation is brutally high,” said Mr. Bourgeois, inspecting the mill’s mammoth crushers as they ground wheat into flour. He has urged the 1,000 bakeries that his company, Moulins Bourgeois, supplies to mark up the iconic French baguette by 10 cents, from a current range of one euro to €1.30, to offset the higher costs that he has had to pass along.

“Consumers can afford to pay more for now, but prices will keep rising,” Mr. Bourgeois said. “It’s horrible.” In France, where baguettes already cost over 8 percent more than they did a year ago, he added, “we remember that the revolution started over the price of bread.”

As inflation continues to flare across Europe, few matters are causing more concern than the cost of a basic loaf. Prices for the most essential food staple have never been higher, and are now up nearly 19 percent from a year ago, the fastest rise on record, Eurostat, Europe’s statistics agency, said in a report released Wednesday.

Russia’s war in Ukraine has been a major factor behind the increase, Eurostat said, by roiling energy markets and driving up prices for grains, oilseeds and fertilizers.

That has contributed to a broader sticker shock for food and other necessities that is rapidly draining consumers’ wallets. In Europe, consumer prices rose at a rapid pace in September from a year ago, climbing 10.1 percent in Britain and by nearly 11 percent across the European Union. The cost of food jumped by nearly 16 percent in the European Union and more than 14 percent in Britain, while energy prices surged by around 40 percent across both.

High consumer prices are a concern in the United States as well. The pace of inflation, near a four-decade high, remains elevated even as the Federal Reserve has tried to cool the economy. Even there, the price of bread has jumped 15 percent from year ago.

The broad nature of inflation is feeding into the anxiety of policymakers and economists that price rises are becoming embedded and will prove harder to contain.

Food companies are passing along higher costs. On Wednesday, the global food giant Nestlé said it had raised prices 9.5 percent in the third quarter compared to the same period last year, up from a 7.7 percent increase in the previous quarter.​

When the price of bread rises, people feel it right away. The squeeze has been sharpest in countries nearest to the conflict zone, especially Hungary, where the cost of a basic loaf surged in September by 77 percent from a year ago, according to Eurostat. In Croatia, Estonia, Latvia, Lithuania, Poland and Slovakia, bread prices are up over 30 percent.

The whirlwind has come as a shock in Germany, where the cost of bread has shot up over 18 percent in a year, as overall inflation has zoomed into the double digits, too, reaching 10.9 percent in September.

Fine Bagles, a bakery in Berlin, recently raised prices for its New York-style bagels to €1.20 from €1.10, and not without considerable angst, said Alice Zuza, an employee.

“There was a debate at the bakery,” Ms. Zuza said. “The owners didn’t want to raise prices, but, in the end, we didn’t have a choice.”

Russia’s willingness to use energy as a weapon against countries supporting Ukraine has inflamed problems by raising gas and electricity costs for flour suppliers. Bills are also soaring for energy-dependent businesses, including thousands of industrial and craft bakeries that run ovens most of the day.

In the Netherlands, a phalanx of bakeries have gone out of business since the end of summer as energy costs have soared. Bakeries in Belgium are raising prices, but one in 10 has been forced to shutter, with more closures expected before the end of the year.

At Velzelio Duona, an artisanal bakery in northern Lithuania, Vaidas Baranauskas has tried to avoid a similar fate. His loaves of traditional rye, made with his grandmother’s recipe, are especially prized. This year, he pushed up prices 33 percent, to as much as €12 a loaf, to offset a jump in the cost of flour, sunflower oil and sugar. The price of dried fruits and seeds used in some breads has doubled.

To curb energy bills, Mr. Baranauskas covered his roof with solar panels. But as winter approaches and the skies darken earlier, he is having to buy electricity at prices that are 500 percent higher than a year ago. He and his six employees now run the ovens four days a week, instead of five, to save money.

“Nothing like this has ever happened before,” Mr. Baranauskas said. “It is a hard time when a lot of companies will have to choose if it is relevant to proceed with their production.”

Industrial bakeries aren’t immune. Major European supermarkets that sell huge quantities of bread have tried to keep prices artificially low to lure customers by haggling with suppliers over how much they pay for ingredients and energy. But stubbornly high costs forced many to mark up prices.

Inflation is also adding to the cost of running a business in Europe by prompting workers, who are trying to make ends meet as their living costs spike, to demand higher wages.

Attila Pécsi, the owner of Arán Bakery, in the popular Seventh District of Budapest, said he had raised the salaries of his 30 employees twice this year. Payroll expenses account for around half the cost of a loaf of bread. Raw materials and energy constitute another third.

With expenses climbing, Mr. Pécsi has raised bread prices 12 percent since January. He is planning another increase before the end of the year. And consumers expect more to come, he said.

That is because prices are unlikely to retreat, said Johan Sanders, the president of Fedima, the European federation of bakery suppliers.

“This is the first time in many years that we’ve seen inflationary effects in staple foods,” Mr. Sanders said. “It’s daunting because it’s there to stay, and it will be difficult to deflate prices.”

Mr. Bourgeois of the flour mill outside Paris was preparing for just that situation. Russia’s war had already prevented Ukraine’s farmers from planting a full crop for 2023, he noted. “Our fortunes are very linked to the war,” he said. “If it keeps up, then cereal prices will stay high for a long time.”

Moulin Bourgeois’s production costs have jumped 30 percent in a year. The electricity bill alone will soon rise to €200,000 a month from €50,000 in 2021. Mr. Bourgeois spends countless hours managing the economics of his business, which started as a single water-wheel-powered stone mill set up by his great-grandfather in 1895 and is now an automated operation with 18 silos, across six acres, able to grind 450 tons of wheat a day.

Recently, he sent a somber letter to the 1,000 bakeries he serves. “Dear customers,” it began. “Never has the price of commodities and energy been as high as it is today. We are obliged to raise our prices on Nov. 1. We encourage you to raise your prices to make up the difference — 10 cents per baguette is reasonable.”

At a popular bakery in the leafy village of Crécy-la-Chapelle, 40 minutes north of Mr. Bourgeois’s mills, the owners, Serge and Marie Pinguet, were trying to postpone that fateful day.

“In France, when bread prices in the corner bakery rise even 5 centimes, people notice it immediately,” Ms. Pinguet said as a line of customers, drawn by the scent of freshly baked baguettes, snaked out the door.

The couple aren’t raising baguette prices for now, out of fear that even loyal customers might turn to supermarkets. But they are increasing the price for croissants and pastries to make up the difference.

“Prices are changing so fast,” said Mr. Pinguet, who comes in at 2 am every day to start making bread dough for the morning rush. The cost of butter doubled in one year, to €12 a kilo, he said, while sugar now costs 30 percent more. Mr. Pinguet now pays €78 for a carton of 360 eggs, up from €39.

While the sacred baguette is still affordable, he said, “all commodities have risen, so prices will keep going up, not just this year but probably for the next two to three.”

“And when prices rise too much, people won’t be able to buy,” Mr. Pinguet said. “It’s a vicious circle.”

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