From quince and champagne paste to the humble roast chook, consumers will have to get used to paying more for their favourite bites as inflation – er – bites.

For the ASX-listed food plays, it’s not so much a question of hiking prices – which seems inevitable – but whether they can do so to the extent that they recover costs without a severe long-term hit to their market share.

A number of small to mid cap plays already have warned of a current-year earnings hit flowing from input cost pressures.

Pandemic-related supply chain problems, labour shortages, fuel costs and the weather have all been mentioned in despatches, while chicken grower Inghams (ASX:ING) mentions chickenfeed costs which apparently are anything but chickenfeed.

Gourmet foods and hamper purveyor Maggie Beer Holdings (ASX:MBH) chimed in with a circa 32 per cent downgrade to its underlying full-year earnings, citing higher import and freight costs among other worries.

The company reckons it can maintain full-year sales at $100 million, but earnings before interest tax and depreciation is expected to come in at $9.25-10.5m rather than the previously envisaged $13.5-15.5m.

“We just had a lot of trouble in the last few months,” rues Maggie Beer chief Chantale Millard.

Millard says the company posted price increases in February, the quantum of which varied according to the product lines.

“We had the usual argy-bargy [with the supermarkets], but they have all been put through,” she says.

It’s a case of so far so good, with broader industry data suggesting consumers are accepting price rises with nary a grumble.

“They’re not cutting back in the same way they have been in the US or the UK, but we have been keeping that in mind when setting prices,” Millard says.

Swings and roundabouts and cheese boards

Maggie Beer shares were hammered by 13 per cent after the downgrade announcement. But the company has a few pricing levers it can pull to restore earnings, especially in its growing and high margin hamper business.

Maggie Beer also stands to benefit if consumers do tighten their belts; they won’t be doing so literally because they are consuming fewer fine cheeses and pates.

Rather, they’re more likely to forego eating out in favour of in-house entertainment – and they will spend a little more on a premium product for the cheese tray.

Broker Taylor Collison opines that with zero debt and a healthy cash balance, Maggie Beer is trading at an attractive discount.

The firm values the stock at 63 cents – a circa 65 per cent premium to the current price – with the prospect of a final dividend being declared in August.

On the chicken front, broker Goldman Sachs reckons Ingham’s poultry feed bill has risen by a not-so-paltry one-third since June last year and 8 per cent in the last three months.

The firm has a dreaded ‘sell’ call on the stock. But given chicken is a source of affordable and sustainable protein, Ingham’s should continue to rule the roost as the country’s biggest integrated poultry producer.

At its AGM this week, Costa Group (ASX:CGC) reported strong pricing for its key lines of mushrooms and tomatoes, with its local and international berry business also bearing fruit, financially and literally.

The company did not offer earnings guidance, but a clumsily reworded disclosure was interpreted as such.

The country’s biggest fruit and veg grower with operations in China and Morocco, Costa’s scale advantages enable it to shift scarce workers around its sites and ensure reliable supply to the grocers.

That said, Costa shares have withered by almost one-third over the last 12 months with past sins weighing on the stock.

The good news – for some – is that an avocado glut has depressed prices, so maybe aspiring first home buyers can afford their inner city café brunches and claim the house keys after all.

This story does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions

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