Butter Prices On The Rise - The Effect on Business Costs

We all love butter - which makes it an essential product for many of us. But, there is a problem. The cost of making butter is rising fast, largely due to a shortage in the supply of cream.

As this excellent video from the BBC explains, businesses that reply on butter as a key ingredient in their products are feeling the effects.

A rise in ingredient (variable) costs is forcing them to pass on cost increases to their customers in order to maintain their contribution per unit.

The example provided is a handmade cake manufacturer, which presumably has customers who are prepared to accept an increase in selling prices.

A great example of how changes in supply and demand at the beginning of the supply chain can have implications further up the chain!