Interviews · 11min read
Interview with Tosin Jack from Mintec
Explore commodity price forecasting benefits and tools for F&B procurement.
Founded in 1982, Mintec is the world’s leading independent provider of global commodity price data and market intelligence for the food industry, consumer and capital goods manufacturers. The UK-based procurement partner enables the world's largest food, CPG, health and beauty, and hospitality brands to implement more efficient and sustainable procurement strategies.
About Tosin Jack
Prior to joining Mintec as a Commodity Intelligence Manager in 2019, Tosin Jack worked as a Senior Industry Analyst for Frost and Sullivan and Analyst at AHDB-HGCA. She holds an MSc in International Economics, Finance and Development from University of Surrey and a B.Agric in Agriculture Economics from the University of Ibadan.
What are some of the common drivers for fluctuations in raw commodity prices?
The pandemic has brought drivers for which we are not necessarily prepared. In a typical year, the drivers are the market fundamentals—the supply and demand balance of the respective commodities. We’ve also got the weather, a key determinant of crop yield, overall supply and sometimes even consumption patterns. For example, in cold weather, consumers tend to favour things that help them keep warm. Plus we’ve got macroeconomic factors, such as interest rates, inflation, currency fluctuations, GDP and overall international trade.
Then there is geopolitics—most recently, we’ve seen Brexit impact trade as a whole. Beyond these standard drivers, we have other costs such as energy, transportation, storage and packaging costs.
What top three pricing factors should buyers take into consideration when negotiating prices with suppliers?
A key pricing factor is that buyers need access to independent price data that is very reliable. Beyond the data, they also need insights to clearly understand price movements. This will allow them to manage their risk and ultimately strengthen their negotiating power with suppliers. Access to this independent price data and actionable insights will help procurement professionals stay on top of market dynamics. This means they can minimise their costs and maximise their profit. Therefore it’s imperative to partner with an independent price data provider and access actionable insights.
Another factor is that they need to get a clear picture of the cost of their product through a cost model analysis. This will help buyers understand and visualise their costs and, subsequently, fully grasp how changes in market prices or supply prices impact them. When you have a breakdown of the costs that go into a final product, it really allows you to comprehend where these changes are coming from. However, this cost breakdown needs to be objective and independent because it enables them to compare it to the cost breakdown from their suppliers. That way, they’ll ensure a fair price and negotiation for both sides.
Lastly, they’ll need access to a price forecasting tool. This really helps them strengthen their buying strategy and minimise their exposure to price fluctuations, which we’ve seen more recently with the pandemic. It was so unprecedented, some buyers didn’t plan ahead. This is why it’s good to have a forecasting tool that allows you to see and get predictions of future price movements. It will enable them to improve purchase times and enhance budget planning.
In what ways can transparent pricing help F&B businesses boost their ROI?
Transparent pricing allows food and beverage businesses to quickly compare their raw material costs. It also allows them to buy and negotiate the best possible prices by verifying supplier prices through benchmark prices. So overall, they can achieve better margins whilst establishing and maintaining stronger relationships with suppliers.
During periods of substantial price volatility, which we’ve recently experienced alongside rapid inflation, businesses really need the confidence to make reliable decisions based on future price trends. However, we’ve seen that many companies lack the necessary data, resources, or expertise for these transparent prices and forecast tools. What happens is that the companies face exceptional threats from their competitors. So to really remain competitive, food and beverage businesses must ensure that they buy at the right price and at the right time. This is what transparent pricing will allow them to do.
Which risk factors does price forecasting help businesses mitigate? And how does this make them more resilient?
Forecasting reduces the impact of the limited visibility of future price movements. Most times, buyers don’t have visibility of the future trends of raw materials. Sometimes they know what’s happening now. Optimally, however, they need to understand what trends might be expected. Visibility of unprecedented changes will help with this. Knowing the best time to buy, best price and ideal length of commitment to a contract will reduce their exposure to uncertainty, such as the pandemic or Brexit. Some level of uncertainty is inevitable, but it is still possible to be prepared with a price forecasting tool.
Such a tool also helps risk managers manage the difficulties around cost planning due to price volatility. They need reliable price forecasts to analyse risks and support their hedging strategies.
Lastly, executives often lack clarity on the future profitability of their business based on their costs. These costs are likely impacted by changes in raw material prices, so a forecasting tool will help mitigate the risk of not knowing how profitable a business will be in the future.
How are F&B businesses leveraging Mintec's price forecasting tool to make strategic business decisions?
Mintec’s forecasting service clearly predicts the movement of commodity prices. It increases businesses’ capacity to allocate budgets appropriately. Our tools also enable procurement divisions to be valuable contributing entities to companies through the cost-saving initiatives that they provide.
Mintec’s price forecasting tool also combines trend-change notifications with hedging recommendations. This helps improve decision-making for the timings and numbers of commodity purchases. This, in turn, helps ensure that category buyers purchase at the optimal time with the right contract strategy. Overall this gives them a competitive advantage, allowing businesses across the food and beverage supply chain to remain resilient despite market uncertainties.
Learn more on mintecglobal.com | Connect with Tosin Jack on LinkedIn
Imagery: (1) & (3) foodcircle.com; (2) Maxim Hopman via unsplash.com