On an industrial estate in north London, the smell of freshly baked bread cuts through the cold January air outside Warburtons bakery. More than 2 million loaves of bread are made here every day, from the production line to the supermarket shelf by 8am every morning, in a process where costs have soared at every stage.
Food prices are still rising at the fastest annual rate since 1977, according to official figures released on Wednesday, and one look inside this Enfield bakery shows why.
For the family-run company, rising costs of wheat, water and yeast – as well as powering its gas ovens at 11 UK factories – have seen the firm raise the price of its best-selling bread by a quarter in just nine months. With inflation at its highest rate in decades, buyers are feeling the pinch.
“Constantly going back to customers asking for a price increase is a hell of a job,” says Jonathan Warburton, the company’s chairman. “It doesn’t improve relations with us, it causes friction.”
Costs at the fifth-generation family business, which started in a grocer’s shop in Bolton in 1870, have risen by £118m in the past year on the several tonnes of flour it needs each week, as well as keeping the ovens temperature close to 300C every day of the year except Christmas.
Warburton says he has no choice but to raise his prices, highlighting how skyrocketing energy costs are spreading across the British economy – from manufacturers to the supermarket shelf – as Russia’s war in Ukraine pushes up global gas prices.
Warburtons Factory. Photo: Graham Robertson/The Guardian
“I think people understand these price increases if you’re clear and upfront with them about what’s going on. It’s not my fault the bloody idiot went into Ukraine, to be honest,” says Warburton.
“Putin doing what he’s doing in Eastern Europe, against the background of Covid, is the main trigger. This sent shock waves through the food industry.”
Across Britain, households are under pressure from rising prices for the weekly shopping, with food and drink inflation at its highest since September 1977. It has been particularly hard for poorer families, who suffer more from rising prices of essentials than wealthy households because they spend a larger portion of their income on food. Official figures show that bread prices have risen by 20.5% in a year, almost twice the overall inflation rate of 10.5%.
Even Rishi Sunak has noticed. Challenged to name a food that had risen in price the most during a TV interview while he was still Boris Johnson’s chancellor, he cited the humble loaf of bread and told the BBC his family had “a whole range of breads” at home. The clip went viral amid criticism that the current prime minister – with a family fortune of around £730m – is out of touch with ordinary people.
At Warburtons, the baker has increased the shelf price of its 800g Toastie loaf from £1 to £1.25 in just nine months – a move the chairman says is entirely due to higher costs.
“What we’re trying to do is recover our costs. We’re not trying to make a profit…we’re just trying to stay neutral, ultimately passing it on to the consumer. We cannot bear £118 million worth of additional costs. The business will go bankrupt and there will be 5,000 people out of work.
Andrew Bailey, governor of the Bank of England, said food was the latest of three major inflationary “shocks” to hit Britain – following the effects of the Covid pandemic and the Russian invasion of Ukraine.
Karen Betts, chief executive of the Food and Drink Federation, expects the inflation rate for her sector to peak later this year. Even then, the rate of price growth will only slow; prices won’t return to where they were a year ago, meaning cost-of-living pressures will remain for some time.
“Most of our companies have got their heads in their hands. They are trying to figure out how to pay increased bills without passing them on to consumers,” she says.
“It’s going to be a tough year. It is clear that this will be a difficult year for consumers and within that for vulnerable households as well as for our companies making ends meet in a difficult economic environment.”
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Going through batches of 10 (the baker’s dozen has long since disappeared in the world of mass production), Warburtons’ vast factory in Enfield produces almost 9,000 loaves of bread an hour. More than four tons of flour per hour are drained from the huge silos outside, seven days a week, 364 days a year.
Crumpets at Warburtons factory. Photo: Graham Robertson/The Guardian
Along with higher energy costs, the war in Ukraine – known as the breadbasket of Europe – has disrupted global supplies of flour, fertilizer and sunflower oil used in food production around the world. Russia and its neighbor are the world’s first and fifth largest exporters of wheat, accounting for almost a third of exports. Although British bakeries sourced very little from the region – preferring local supplies and imports from the US and Canada – the war that hit such important producers raised prices everywhere.
Warburton says his business is the biggest consumer of Canadian wheat in Europe, preferring to mix the premium crop grown on the North American prairies with English produce. That’s a big contributor to its higher costs, with reduced supply pushing prices up globally.
“It affects the global market. You’re just affected by it. And you buy in US dollars and we do our best to convey coverage and smooth it out,” he says.
The baker says the higher wage bill for the company’s 5,000 employees pales in comparison to an 85% increase in gas and electricity bills. In addition to the huge steel ovens it has to heat, Warburtons has been hit by rising diesel prices to ensure its 1,200 lorries can keep up with daily bread deliveries.
The cost pressures facing the company come after a period in which bread prices have generally fallen over the past decade, thanks to overcapacity in the industry and heated competition between supermarkets. Warburton says the price of the Toastie remains good value compared to a cup of coffee and other everyday products.
Still, with Britain’s economy facing a potentially prolonged recession this year and consumers expected to cut spending sharply, he hopes no more spending increases are around the corner.
Barring, he says, any other black swan moments. The term is used in economics to describe events that are unpredictable or unforeseen, like the bird, which was not known in the west until the discovery of Australia.
“There can be external shocks. And do you know how many black swan events there have been in the last three years? I thought you only got one every 25 years. But right now there is a whole flock of swans.
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