§ Mr. Corbett
asked the Secretary of State for Prices and Consumer Protection if he will make a statement about the report of the Price Commission on the prices, costs and margins in the importation, processing and distribution of coffee.
§ Mr. Hattersley:
The Price Commission has inquired into the reasons for the sharp increase in coffee prices since the beginning of 1976. Its report has been published today, and I have arranged for copies to be placed in the Library.
The report is devoted chiefly to soluble —"instant"—coffee, which accounts for over 85 per cent. of manufacturers' sales. It shows that most of the retail price increase is due to the rising cost of raw materials. This in turn is due primarily to a physical shortage of the commodity, but the Commission points out that the depreciation of sterling has added to the increase in the United Kingdom. The impact on the consumer is delayed because it takes six to eight months for raw coffee prices to be reflected in the retail price of instant coffee. The Commission found no conclusive evidence that speculation on the commodity market or the fiscal policies of the producer countries may have contributed to the rise.
The Commission finds that the percentage margins of dealers and manufacturers were considerably lower in 1976 than in 1974. The gross percentage margins of wholesalers and retailers have on the whole remained constant. Although these margins are consistently below the average for the grocery business as a 270W whole, the rise in prices has meant that cash margins have improved relative to other grocery products.
This is a valuable report which sets out a good deal of factual material explaining why the increase in retail prices has taken place. It emerges fairly clearly that some firms have, at one time or another, faced considerable difficulty because of the rise in prices and that they have not been profiteering by increasing their normal markup. Nevertheless, the maintenance by distributors of their traditional gross percentage margins during a period of rapidly increasing prices has meant greatly increased cash margins.
Consumer resistance may have some limiting effect; but in view of the further retail price increases which are still in the pipeline I do not think that the situation should be left as it is. I therefore propose to introduce a maximum cash margin on retail sales of instant coffee by order under Section 2 of the Prices Act 1974. I am today beginning urgent consultations with interested parties so that the control can be brought into force as soon as possible.