Northern Foods told shoppers yesterday that they had yet to see the full effects of the strongest inflation in food costs for 14 years, despite a string of price increases across supermarkets in the past month.

Stefan Barden, chief executive of the group behind Goodfellas pizzas and Fox’s biscuits, said that many retailers were waiting until the new year before hitting consumers with the bulk of cost increases.

Northern Foods’ costs will be £40 million higher this year, given a 100 per cent rise in key ingredients such as wheat, cocoa and dairy products. Mr Barden said: “We’ve managed to pass on all the increase we have seen, but as far as the consumer is concerned, retailers are waiting until they get through Christmas before they pass most of this on.

“Food prices are going to be rebased. They have been very, very cheap, at historic lows, but global demand is pushing them up. A lot is going to depend on next year’s harvest.”

Northern Foods is the biggest supplier of ready meals to Marks & Spencer and generates most of its money from M&S and the likes of Tesco and Sainsbury’s. The price of some its best-known brands have already increased by up to 15 per cent since September.

Mr Barden said that the average price increase across the group’s product range was likely to be about 4 to 4.5 per cent.

Official figures on Monday showed that food prices were increasing at the highest rate for more than a decade because of poor harvests in Australia and surging demand for milk in China. The ability of Northern Foods to pass on higher costs meant that its pretax profits in the six months to September 29 rose 38 per cent to £20.1 million.

Total revenue in the period, the first half of the group’s current financial year, rose 2.5 per cent to £438.6 million. The operating margin rose by 20 basis points to 6.1 per cent.

Mr Barden took over as chief executive from Pat O’Driscoll in February after a string of profit warnings. Previously he ran the group’s chilled food and bakery operations.

He outlined a profit improvement plan last month and yesterday said that revenue in the bakery division, which includes Fox’s biscuits, was growing for the first time in nearly two years. Underlying sales in the chilled business, which includes ready meals and pizza, was up 5.4 per cent.

The group said that trading conditions in the second half would remain “challenging”, but Mr Barden said that further job cuts were unlikely. About 80 staff were lost at the group’s Dalepak meat business last month after the poor summer hit sales.

Shares dipped 2p to 98¼p. However, Andrew Saunders, retail analyst for Panmure Gordon, said that the company was an “undervalued turnaround play . . . With price rises now fully negotiated with retail customers, the company looks well placed to improve on the margin progress seen so far in the second half.”

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