Pizza makers are grappling with the rising price of the wheat used to make the base. The large, small and medium players in the industry of more than 141,000 million dollars globally, are trying to deal with the price increases of one of their main inputs, without sacrificing their quality, competitive advantages or customer loyalty.
Jacobo Caller Celestino, general director of Food Delivery Brands Group, the company that acquired the rights to develop Pizza Hut in Mexico, comments that, since the second half of last year, they began to identify increases in raw materials, as part of the phenomenon inflationary situation in the world, but this situation was made worse by the conflict in Eastern Europe.
When the conflict began, on February 24, the price per bushel of wheat was $9.25, while on June 3, the price per bushel was $10.45, according to data from Bloomberg. The price reached its historical maximum on March 7, 2022, when it was located at 12.53 dollars per bushel, a unit of measurement of capacity for solid merchandise that is used in Anglo-Saxon countries.
In one year, this cereal -of which Russia and Ukraine guarantee 30% of world trade- has seen its price increase by 56.2%.
Food Delivery Brands uses this commodity to make the pizza dough for its brands (Pizza Hut, Pizzas Apache, Telepizza and Jeno’s Pizza), in 32 countries, including Mexico.
Caller Celestino details that 50% of the wheat flour they use for their global operations comes from Ukraine, as does 50% of their sunflower oil requirement. Russia and the Ukraine concentrate 80% of the production of sunflower oil, according to a report by JP Morgan.
Added to the increases in these two inputs was the increase in the price of cardboard boxes and mozzarella cheese.
“We had estimated a commodity inflation of around 12% when we made our budgets and the war in Ukraine has put another 8% on us. More or less we are in an environment where raw materials rise by 20%,” he says.
Although the company has so far absorbed most of the increases in its operating expenses, together with its suppliers, it made a 6% adjustment in the price of pizzas. The manager does not see this rise in the prices of raw materials coming to an end, at least until the last quarter of this year.
Looking to the future and without a ceasefire, the alerts remain on. “We are concerned that (the war) will take more than nine months,” declares the director.
“I do not see a drop in inflation in the short term, we operate in futures markets, with which we are anticipating what the futures of raw materials say and (the price) will depend on the war. If it lasts beyond the summer, there is a risk of losing next year’s (wheat) harvest,” he concludes.
