this is bbc news. the headlines. israel mobilises its police and army reserves following deadly attacks in tel aviv. on friday, an italian tourist was killed and several others wounded. hours earlier, two british—israeli sisters died after a shooting in the occupied west bank. china begins three days of military excercises off the coast opposite to taiwan, following president tsai ing—wen�*s trip to the united states. beijing warned the island against what it called taiwanese separatists in collusion with external forces. senior labour figures continue to defend an advert published by the party which claims that the british prime minister, rishi sunak, did not think adults convicted of sexually assaulting children should go to prison.

and, buckingham palace has invited more than 850 community and charity representatives from across the uk to attend the coronation of king charles, which will take place on the 6th of may at westminster abbey in london. you're watching bbc news. now its time for talking business. hello, everybody. a very warm welcome to talking business weekly with me, aaron heslehurst. let's go and take a look at what's on the show. the cost of living has been going through the roof, but can it possibly go up even more? and do prices ever really come down? we're going to be looking at how those prices get set and what goes on behind the scenes between growers, suppliers and the shops themselves. i'm going to be discussing all of that with this crack team. there they are. commodities expert kona lasker haque can tell us where the markets think prices of raw materials are heading. kai—markus mueller, who's the neuroscientist who gives us the psychology behind the way shops

set their prices. and christel delberghe, she's the boss of eurocommerce, which represents the big retailers in some 27 countries across europe. also on the show, from the coffee field to your daily mug ofjoe, i've got antonio baravalle, the big boss of the coffee giant lavazza, to talk to us about pricing from bean to cup. wherever you'rejoining me from around the world, once again, a big hello and a very warm welcome to the show. blimey, how much is that? you know, that's the question millions of us are now asking ourselves as we shop for everyday essentials.

the cost of most of the things that we buy has gone up and up for pretty much everyone on the planet. this inflation is the reason central banks are ramping up their interest rates. workers are demanding higher wages and shops, they are the new battleground between retailers and their suppliers. the boss of the biggest retailer right here in the uk, it's tesco, told the bbc about how his company negotiates with suppliers about price. i think you need to talk to the individual suppliers to if you think that their price increases are hard to justify. we worked very hard at tesco to analyse the make—up of our food products. an awful lot of our own label is bought on what's called an open book basis. in other words, we see what the ingredients are costing our suppliers and we have an agreed kind of profit margin for them on top of their raw material costs and their operating costs. so we know exactly what's going on there. and, you know, we don't

have the same access to the profit structures of our branded suppliers, but we do challenge them as hard as we possibly can. ok, so let's start with the raw ingredients. take wheat, for example. before the pandemic, about four years ago, a bushel of wheat was trading on the market at $4.70. that spiked when russia invaded ukraine one year ago. the same amount of wheat went up to almost 13 bucks a bushel. but at the end of march this year, it was sitting at around $7, much less than the peak, but still 47% higher than before the pandemic. it's a similar story with cooking oil. before the pandemic, a pound of soybean oil was trading at around $0.29. after the war began, that shot up to nearly $0.76, so more than doubled. and now it's settled somewhere in between at around $0.55 a pound. still, 90% more than before the pandemic. much of those costs follow the same

pattern as energy prices. oil prices — they were coming down, but they shot up again in the last week or so after the oil—producing cartel, 0pec, along with its partner russia announced that they would cut just how much oil they sell, causing prices to head higher once again. so, where are the prices of these essentials heading right now? well, to find out, i caught up with one expert whose predictions over the last few years have been pretty accurate, to say the least. kona lasker haque, it's always a pleasure having you on the show. kona, you and i have spoken over, over many years about the direction of commodities, and i'm going to be frank here, you've always been ahead of the curve, so, what, if anything, can the commodity markets tell us right now about the direction of prices going forward? so, commodity prices have actually stabilised a bit. they had peaked out back in the summer of 2022 last year,

just after the ukrainian invasion. and now they've fallen quite a bit since then. but we're not quite out of the woods because oil prices are picking up again. there are a lot of suppliers amongst 0pec who are looking to cut back production. china has come back into the world market and they're consuming more after their post covid lockdowns. so there are some supply demand tightness emerging in certain commodities, which means that, yes, prices are lower than they were a year ago, if you like, but they're not drastically coming off either. kona, you and i right now are here in the uk and i'm wondering, are there any special factors here in the uk or are we seeing prices just consistently behaving the same as other countries? no, i think in the uk we've seen food inflation being a bit more of a factor than our peers. and i think there's there are a couple of reasons for that. the first one i would say is brexit. the brexit has led to quite a few disruptions

on the border side of things. so flows of imported goods from europe, which is our biggest trading partner, has not been smooth and frictionless. so there's definitely been a lot of delays and cost increases on that side of things. and the second impact slightly related to brexit, but also perhaps more due to post—covid, it is the lack of labour. you know, we have seen the so—called great resignations phenomenon where a lot of people are no longer in the workforce. but again, also perhaps due to brexit, we've seen quite a few temporary workers leave the uk to go back to the european union. you know, we were relying on them for processing the foods or at the farm, farm level. and i think the lack of labour or as a result the higher cost of labour means again that the cost of food by the time it gets to the supermarket has become elevated so much more than it normally would have been. and, kona, i've done it before,

i'm going to do it again. i want to put you on the spot. in a year's time, what are price going to be doing? that's tricky, because this time last year you asked me the same question. and thankfully, i was right. i'd suggested that price is going to go quite a bit higher. and yes, they did. a couple of factors. number one, the world economy is under a bit of stress. so demand is slowing, i would say, across the board, mostly because of the cost of living crisis. inflation is just very high, which makes people feel poorer and means the disposable income is less. secondly, interest rates are going up, which again has the same impact of making you feel less wealthy if you like. so that might impact demand to a certain extent. if demand slows, what happens on the supply side? and that is where the big question is. i think if you were to ask me a year on from now what's going to happen to russia and ukraine, unfortunately, ifeel that the the war will continue, which means that will continue to remain a supply side block, which remains mired in uncertainty.

so whether it's the grains corridor or exports flows, that can continue to be fraught with risk. and the final thing is the other producing regions, you know, we are seeing some sort of climate change, unfortunately, which does create havoc across the world, particularly tropical countries. so whether it's floods or droughts, inevitably you're going to see some of that in some key producing region. and i think that, again, may affect the supply side. so bottom line, unfortunately, i think prices are not likely to get back to levels we saw pre 2019, the pre—covid levels because the whole world has structurally changed. costs are higher, inflation is here. the cost of processing and shipping things are high. so prices may come off a little bit, but we're not going to go back to levels we saw five years ago, for example. so, kona, i'mjust wondering, do do we as consumers who, let's be frank, have been used to pretty cheap food for some years, do we have to just now get used

to these higher prices? i think the whole 2000 and early 2010s where we used to enjoy really good prices for pretty much everything, we enjoyed low inflation for the longest time. those days are gone. we're now going back to the 70s and eighties, not skyrocketing. inflation will come down, but we're not going to see the rock bottom prices that we saw back in the early 2010s. i think those days are gone. unfortunately, interest rates are going to be have to stay high in order to tackle inflation. but it also means that we're going to have to think twice before we go for our expensive food habits. well, on that point, kona lasker haque, my friend. a real pleasure having you on the show, as always, and, kona, i'll talk to you soon. thank you so much. so there you go, that's the start of how prices get set. but how much does psychology play in the price that we pay for our shopping? well, my next guest has literally

written the book on this. it's called the invisible game the secrets and the science of winning minds and winning deals. kai—markus mueller, a real pleasure having you on this show. and kai, let's start with this. what are some of the tips and tricks that retailers use? well, there is a wealth of them in consumer psychology. but i'll tell you a few of them. a very, very, very strong component is, for example, the default effect. so, for example, if you have a subscription, it renews by default and we have trouble thinking about the renewal, wejust let it go. then there are things like red signs for discounts. people have learned these things over and over that red signs give you pleasure. people believe that they get a good deal despite the fact that they are actually playing a game that is set by the company

that sells these products. and kai, i'm wondering, do you think, you know, are consumers more likely to be accepting of rising pricesjust because of all the information about inflation that we we're constantly hearing about? yes, absolutely. 0ur minds adapt very quickly to new situations. and a very important concept in that respect is anchoring. so if i am getting used to high numbers, also my price perception goes up and i am more much more willing to accept high prices. however, one problem from the corporate perspective is that if you train your consumers to become bargain hunters, it's very hard to retrain them to accept high prices. well, kai, economics would suggest that we we would always choose the best value. but that's that's not always the case. i'm wondering, do consumers find reassurance in higher prices?

indeed. that is something that scientists call the price quality heuristic. and that means that not only the high quality influences the price, which is how we usually think about the world. no, the price also influences the quality perception, and that has been shown in a number of incredibly interesting studies. for instance, it's been shown that the same wine wanted the same wine tastes better if it's designed to be expensive. also, painkillers. the placebo effect of a painkiller is much stronger if you label that painkiller as an expensive painkiller as opposed to a cheap painkiller. and kai, what do you think about companies using shrinkflation? you know, keeping prices the same, but but making the product smaller?

i mean, is that effective? shrinkflation is effective. depends very much on the perceptual threshold. so for example, in weight, if i compare two weights, i need at least two grams of difference for 100 by 100 grams to perceive that difference at all. now, over time, that becomes more so i maybe forget that last week, you know, that carton of milk or that little piece of tea or so was slightly heavier than this week. so companies understand what the perceptual threshold for the different units is, they have good chances to make shrinkflation successful. kai, are retailers, are they nervous about raising prices? oh, yes.

that is a big issue. everybody who sells is very, very nervous about prices. indeed, i ran brain scan studies where i could show that the consumer willingness to pay is in some cases, significantly higher than the value perception of the person who sells. that means there is a strong hurdle and and lots of pain on the seller side, which is completely unnecessary. kai—markus mueller, an absolute pleasure having you on the show. thanks so much for your time and i'll talk to you soon. thank you for having me. well, you know, in the end, it's the price in the shops that customers really care about. so what kind of pressure are they under to keep the costs low and how do they negotiate with their suppliers? well, to find out, i've been speaking with the director general of eurocommerce. that's the organisation that

represents retailers and wholesalers in 27 european countries. christel delberghe, a real pleasure having you on the show. and christel, can we start with this? because as we've been seeing the costs of raw materials heading higher, how much pressure are your members facing to to keep the prices down? well, the pressure on retail is immense. today, inflation in europe is about 10% and inflation in groceries is 19%. and the pressure is on on retail is exerted via the higher cost of the goods for resale, the higher cost of operation. and they're facing consumers hit by a severe cost of cost of living crisis. for them in the retail, the retailers have been able to cushion consumers from the worst of the inflation. retailers have been absorbing part

of the higher cost increases. and they've been doing this via promotions by making a huge investment in pricing to ensure that consumers to ensure that consumers can get good deals. and christel, i'm wondering, what kind of conversations are the retailers having with the suppliers? well, the conversations are are pretty tough and the situation is very difficult at the moment. retailers negotiate on behalf of consumers for the best deal and the best assortments. and what we have seen is a concerning trend by the manufacturers to seek, in particular from the large global manufacturers, large global brands, who have been seeking to push up price increases beyond the cost increases. and christel, i'm just wondering, are your members, the retailers, are they reporting the changes, any big changes in consumer

behaviour due to the cost of living crisis? yes, indeed, consumer behaviour has changed quite significantly and it has changed across the board. they're favouring long shelf life products like rice and pasta, they're looking out for promotions and they stock up when buying and promotions. they're looking for cheaper brands, some more budget line products, more private labels. they're investing a lot to help consumers and to cushion them from the worst of the crisis and and inflation, the high prices. and, christel, what are your retailers saying about the outlook for prices? i mean, are more rises to come, do you think? well, the situation is still very uncertain. we expect prices to go down in the course of the year as energy prices are are going, down as the commodity prices are going down.

in the agri food chain, there is a lag. and so prices should stabilise more likely towards the end of the second half of the year. but in the meantime, in the meantime, our prices are still are still keeping up. well, on that point, christel delberghe, a real pleasure having you on the show. thanks so much for your time. and i'll talk to you again soon. thank you. you know, on today's programme, we've been looking at how companies are setting prices as the costs go up and up and customers are squeezed. coffee, it's a treat, but the price of coffee beans has been on the rise like so many other commodities. four years ago, before the pandemic, a pound of arabica beans was trading on the market at around $0.94. one year ago, after the invasion of ukraine, thatjumped to $2.33 a pound. and in march this year it was trading at around $1.68. so somewhere between the two,

but it's still 80% more than pre—covid price. add to that the increasing cost of energy, and it's a challenge, a big challenge for big coffee companies to think about how they pass on the costs to their customers who are thirsty for their morning cup of go—gojuice. so i've been catching up with the big boss of lavazza, the iconic italian coffee giant. antonio baravalle. a real pleasure having you on the show. and, antonio, let's start with this, because this week's show, we've been talking about how difficult it is for companies to set prices. and we've seen coffee bean prices go up quite a lot. so i'm just wondering, antonio, how have you dealt with that when it comes to setting your prices? i think that all the industry faces very, very huge cost increase. and also remembering that a company like us is buying in dollars at the new york stock market. so the ratio between dollar and euro is so important. so we only partially pass the cost

increase to consumers. so i would say that at least 50% was absorbed by the company and 50% was given back to to the industry, so to the market. but again, this is up to the fact that we can do it because we are a family company. and antonio, you negotiate with with all the big retailers around the world. i'm wondering how difficult have those negotiations been, given these surging prices? yeah, you know, i totally understand also their position because if i compare what is happening to retailer in this moment, you know, costs like energy that in the past were less than 1%. now we are to five, six, 7% that at the end they buy and very sell the products to consumers. so i would say that it's very,

very tough discussion for sure. and we got many example in all europe of tough discussion between trade and, you know, fast—moving goods company. i think that we always have been very reasonable in the last three orfour years in the relationship with the trade, knowing that there is the right limit and the right balance sheet for them, for us, and the right threshold where the two faces can start talking to each other. so i would say it's a very tough discussion, but probably thanks to our past years history and the credibility also that we got on the market, we have always been able at the end to find the right solution with them, but not an easyjob. but these retailers, they often have their own brands. i'm just wondering, is that a big plus for them when negotiating?

you know, in theory, you should have a chinese wall between your private label business and all the rest, in theory. but, you know, from one side, it can also help them to understand the reason why of price increase, because they have to buy raw materials, we have to buy coffee. they know very well that normally to give you the right dimension of a timing. when i order coffee today, it takes four months before it arrives in italy and the one month, two months before that we transform it and we distribute. so even if the price tomorrow morning is going to go down 50%, we got six months of tailor that doesn't allow you to change anything. so i would say if a trade with a private label do our business

inside the coffee category, it also helps them to understand what does it mean from really a supply chain point of view. then everyone is trying to do his own game, but that is another issue. and, antonio, let me ask you this, because some coffee producers, rather than risk putting off consumers by increasing their prices, what they've been doing is changing the sizes of their packaging. of course, it's become known as shrinkflation. is that something lavazza has entertained. --? i will be very strong. that is a joke because we have too much respect for our consumer. is not the changing a visible price and giving them less products that you know you do the good for your consumer. as i told you, we are smaller. so we decided to take part of a cost increase in raw materials

because we wanted to, we wanted to increase penetration. and in fact, the last year we grew also 5% in volume. that is very tough in here, like this one, doing something like that, we consider not the serious approach towards the consumer. so we have too much respect for them. 0k. let me end on this and let's spin a yearahead. antonio, prices higher or lower than today? i still think that we didn't see yet a small piece of inflation, but we will see it on prices, let's say, before the summer, because all all companies will rise the prices in october, november, but have to argue with a trade to discuss. normally this is a six month time, so i'm not going to say to the cost before covid, but a more reasonable cost. so we are going in that direction. but i think that there will be

still six months where we could have some small surprises yet on inflation. well, on that note, antonio baravalle, the big boss of lavazza, a real pleasure having you on my show, my friend. thanks for your time and we'll check in with you soon. thank you. it was a pleasure and an honour to be with you. well, that's it for this week's show. i hope you enjoyed it. don't forget, you can keep up with the latest on our global economy on the bbc website or the smartphone app. you can also follow me on twitter, tweet me, i'll tweet you back. you can get me @bbcaaron. thanks for watching, i'll see you soon, bye—bye.

hello, there. we started off with a bit of a westie divide first thing this morning. a lot of low cloud, misty and murky conditions on the east coast. further north and west it was a beautiful start. very tranquil with plenty of sunshine across lint —— lake windermere first thing. if you look at the satellite picture you can see most of the cloud has been spilling in off the north sea. we will be chasing cloud amount through the afternoon. 0n the whole most of us will keep some decent spells of sunshine. always the risk of that cloud just sitting along the far east coast, may be thick enough for a spot or two of light drizzle from time to time. but with the best of the sunshine on the best of the warmth, it will be 16 celsius, 61 fahrenheit. the breeze will strengthen into northern ireland by the end of the afternoon and will continue to strengthen through the night. that will prevent

mist and fog patches reforming through the night. we may well see some cloud once again towards the east with low to mid to single figures to greet us first thing on monday morning. a bit of a chill in the air. nevertheless, sunday is going to be quite a promising day. a little bit more of a breeze but coming from a southerly direction. so that will help lift and break that cloud quite nicely. i suspect as we go through the day on sunday, if we have got some cloud to the east, hopefully that southerly wind will have to break it up. more sunshine coming through. temperatures peaking at 17 celsius. yes, clouding over with outbreaks of rain into northern ireland by the end of the afternoon. that rain will post steadily eastwards overnight. easter monday will see this frontal system bringing us change to the weather story, turning increasingly white, and increasingly windy as well. as the rain eased as a way, those strong westerly winds will bring in some showers through the

afternoon. sunny spells and scattered showers for many through easter monday, highs of ten to 15 degrees. that set the trend for the week ahead. it looks likely to be an unsettled one. spells of rain. the winds will strengthen, perhaps gale force at times. so, showers michael —— or longer spells of rain, and temperatures easing the way compared to today. take care.

live from london. this is bbc news. israeli police and army reserves mobilize after three people are killed in separate militant attacks in tel—aviv and the west bank. the taiwanese president's visit to the us sparks three days of military exercises from china. the king and queen consort have invited hundreds of volunteers and charity workers to next month's coronation. tennis star boris becker is out of prison — and tells the bbc about his experience. i was surrounded by murderers, by drug dealers, by rapists, by people smugglers, by dangerous criminals.