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Sector of the week - FMCG

FMCG Sector - CO2 Shortages

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FMCG Sector - CO2 Shortages
CO2 shortages are being flagged by the food industry, because CF Industries, the major fertiliser producer in the UK, ceased production at its two main plants in response to soaring utility (gas) prices. CO2 is a by-product of fertiliser production, so this is now impacting the availability of food-grade CO2 (down by 60%).

The government has agreed to subsidise fertiliser production at one of CF's plants for the next three weeks. This is a positive development and should help alleviate the pressures that have built up across the supply chain. But this is clearly a short-term fix to an issue that looks more long lasting given the challenging economic backdrop, due to high gas prices, for fertiliser production. We would see this more as "disaster averted" than "problem fixed".
 
Food-grade CO2 is used in the food industry as a means to stun pigs and chickens before slaughter, to promote the growth of plants in greenhouses and to transport food safely. It is also used for packaging items such as fresh food and baked products, extending preservation by preventing bacteria.

“COshortages due to soaring gas prices risk impacting both the food and drinks industries.” 

Damian McNeela Director, FMCG Research
Within our FMCG sector coverage, the most at risk from the immediate situation are stocks with vertically integrated operations. CO2 is also used across the drinks industry in order to carbonate water, soft drinks and alcohol, as well as to dispense drinks in pubs. As such, there could be implications for this industry too. 

Pressure will likely remain across the supply chain despite the government’s agreement with CF Industries. The issue has now spread to impact European CO2 production. 
 

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