Posts Tagged “food inflation”
Celebrating summer with a barbeque event will be costlier this year, a new economic analysis from Rabobank shows.
The 2023 Rabobank BBQ Index reveals a 10-person barbecue will cost nearly $100 this year, according to a news release. In fact, food items listed on the barbecue menu have jumped 31% since 2018, according to Rabobank.
The Russia-Ukraine war, severe drought, higher wages and rising costs of farm inputs, transportation and energy have combined to fuel broad-based inflation throughout the supply chain.
COUNTING THE COST
The 2023 Rabobank BBQ Index, which measures the cost of staple ingredients for a 10-person barbecue, shows that it will cost $97 to host a cookout on Independence Day this year, up from $73 in 2018.
Food prices have shot up 31% in the last four years, the biggest four-year gain since the late 1970s oil crisis, according to Rabobank.
Here are price increases over the last four years, according to Rabobank:
- Soda: 53%.
- White bread: 51%.
- Potato chips: 46%.
- Chicken: 37%.
- Lettuce: 29%.
- Ground beef: 25%.
- Beer: 22%.
Despite the elevated food costs, Rabobank analysts said many consumers — particularly those under 40 — are now prioritizing experiences over goods and are willing to splurge for a special occasion.
“Consumers have taken some heavy punches but they’re still standing,” Tom Bailey, senior consumer foods analyst at Rabobank, said in the report. “They’re being shrewd in areas that don’t enrich experiences, while giving in to the urge to splurge where it matters most. With that mindset, look for spending to heat up this summer on quality meats and drinks — the recipe for a memorable barbecue.”
The trend to value “experience over things” was emerging before COVID-19, but Rabobank analysts said the shift has accelerated, especially for millennials and Generation Z. For baby boomers, spending on travel and food has increased, in part thanks to an 8.7% cost-of-living adjustment to their Social Security benefits this year, according to Rabobank.
A healthy labor market is also keeping consumers willing to spend their money. The May jobs report showed that unemployment sits at 3.7%, down from its pandemic peak of 14.7% just three years ago, Rabobank economists said.
“Steady work makes it easier to justify increased spending when budgets are tight,” Bailey said in the report. “Rather than trading down to soften the blow of stubbornly high inflation, we may see consumers trading up to more premium products.”
The Rabobank BBQ Index, according to the report, assumes an average American barbecue event on the Fourth of July with 10 adults, with each consuming the same amount of food and beverages.
The index assumes each person will consume one cheeseburger with lettuce and tomato, one chicken sandwich with lettuce, tomato and a slice of cheese, two handfuls of chips, a beer, a soda and a few scoops of ice cream.
Consumers are more concerned about inflation than COVID-19 these days, according to the monthly primary shopper survey series by IRI in partnership with Anne-Marie Roerink, president of 210 Analytics.
“In January, 38% of the population were extremely concerned over COVID-19, which was down sharply from 66% in April 2020,” Jonna Parker, team lead for IRI Fresh, said in a news release. “Shoppers are very aware of food inflation (89%) and the vast majority (95%) worry about it.
“In total, 42% of shoppers are extremely concerned about the price increases they are seeing across the store — which means food inflation has more people on high alert than COVID-19 as of January 2022,” Parker said.
Like the inflated prices of products overall, fresh produce prices are also higher than last year.
The combined effect of concerns over COVID-19, inflation and supply chain challenges explains why shopper demand remains in flux as we enter the third pandemic year, Roerink said. In 2022, IRI, 210 Analytics and the International Fresh Produce Association continue to team up to document the dynamic marketplace’s impact on fresh produce sales.
The January survey showed several in-depth findings about fresh produce sales, volume, prices and shopper behavior.
In January 2022, the price per pound for total fresh produce increased by 9.0% over January 2021. The latest 52-week look is milder, at 7.1% increase, given the much milder inflation in the second quarter of 2021. Vegetable inflation is far below average, but fruit prices increased by nearly 14%.
“Consumers are aware and concerned about the inflation they are seeing,” Joe Watson, vice president of retail, foodservice and wholesale for the IFPA, said in the release. “And as a volume-driven business, the industry is concerned, as well, and doing everything in its power to get adequate supply to the stores and keeping prices down.”
The consumer price index increased 7.5% for the 12 months ending January 2022, the highest increase in 40 years, according to the Bureau of Labor Statistics.
IRI-measured price per unit for all food and beverages in multioutlet stores, including supermarkets, club, mass, supercenter, drug, military and other retail food stores, also shows that prices continued to rise over and above their elevated 2020 and 2021 levels.
Perishables, including produce, seafood, meat, bakery and deli, had the highest year-over-year sales growth in 2021, at +6.2% out of all food and beverages. However, fresh produce sales gains were below average, at +4.4%. Frozen foods had the highest increase versus 2020, at +26.0%.
From a dollar sales perspective, January 2022 was another great month for fresh produce, surpassing the records set in 2020 and 2021.
However, dollar gains were inflation-boosted while units and volume sales declined year on year.
“The risk in the current levels of inflation is volume pressure,” Watson said in the release. “At the same time, it is hard to measure the effect of supply chain disruption, several winter storms affecting the Northeast and the impact of frozen and canned purchases on fresh produce sales. In all, January 2022 sales still tracked ahead of January 2020, which was not yet affected by the pandemic purchase patterns.”
Each of the five January weeks generated $1.3 billion or more for the fresh produce department, with the week ending January 16 being the biggest, at $1.43 billion. While year-on-year dollar sales were higher each week, volume sales were down. Year-on-year decreases varied from -1.7% the week ending January 16th to -6.2% the first week of the year.
“Our monthly shopper surveys are finding that consumers are hyperaware of inflation and are trying to mitigate the increases as much as possible,” Parker said in the release. “And that is exactly what we are seeing in recent trip baskets. On average, people are spending roughly the same amount of money per trip, but they have many fewer items in their baskets.
“Saving by buying less is typically one of the later money-saving measures during periods of high inflation, but with the lack of promotions and already cooking a lot more at home, consumers are drawing on the lessons they learned and fine-turned during the Great Recession,” she said. “For many, that means buying less quantity and we are seeing that very clearly in fresh produce.”
January 2022 gains were down from the fourth quarter growth numbers across the board. Year on year, vegetables dropped into the negative.
Despite above-average inflation for fresh produce, its share of dollars remained below average in January 2022. Shelf-stable fruits had a very strong January, with year-on-year sales gains of 7.5%. Both frozen and shelf-stable are heavily impacted by supply chain disruptions and assortment, and inventory levels have been down significantly over recent months.
January Fresh Fruit Sales
“On the fruit side, all top 10 sellers gained versus a year ago with the exception of bananas,” Parker said in the release.
In a change from 2021’s reporting methods, this year’s reports will show the increase in dollars and the increase in volume versus a year ago.
“The difference between the two percentages is a close match for inflation on a per-pound basis, though lower promotional levels also play into higher dollar gains,” she said.
For instance, while January 2022 avocado dollar sales were up 13.3%, pound sales were down 12.4%, which would translate into inflation of about 26% on a per-pound basis, Parker said. In looking at the actual numbers, the average price per pound for avocados in January 2022 was up 29.4% versus a year ago, while promotional levels were down by 15.4%.
“This new reporting will help provide a better look at the effects of inflation, plus less promoting, on the dollar performance,” she said.
January Fresh Vegetables Sales
“The top 10 sellers on the vegetable side had a mixed performance in terms of dollar sales growth but has been very consistent in makeup,” Watson said in the release. “Tomatoes, potatoes and packaged salads have been the top three sellers for many months running. The importance of salads is further underscored by lettuce sales, in fourth place.”
Carrots had the strongest volume growth performance, pulling even with year-ago levels.
What’s next?
The marketplace disruption caused by inflation, supply chain challenges and COVID-19 is not showing signs of letting up any time soon, the report shows.
Shoppers are reacting several ways:
- At 82.4%, the at-home share of all meals reached its highest level in a year, which favors spending at food retail;
- At the same time, the inflationary levels in retail have two-thirds of shoppers looking for one or more money-saving measures. Inflation will likely continue to drive dollar gains for most categories in the foreseeable future but is pressuring unit and volume sales;
- For the first time since the onset of the pandemic, a greater share of shoppers (29%) feel their financial situation a year from now will be worse versus better (23%). About half, 48%, think it will be unchanged. This outlook may prompt a greater focus on money-saving measures beyond the current marketplace behaviors alone; and
- Continued rising inflation and shortages are driving stock-up behaviors among 42% of shoppers. While 58% do not buy more than they need, 14% stocked up on one or more items out of concerns for continued price increases and 19% stocked up out of fear that the item will be out of stock next time.
Fresh produce prices are up, and the majority of consumers are concerned about the rising cost of their food and beverage bill, including fruits and vegetables.
That’s according to the March 2022 fresh produce report titled “Inflation Remained the Big Story for Fresh Produce in February 2022,” from IRI and 210 Analytics.
The report, covering the four weeks ending Feb. 27, shows that, while dollar sales are “looking good,” the “volume pressure is real,” 210 Analytics President Anne-Marie Roerink told The Packer in an email. “Combined fruit/vegetable inflation is now trending in the double digits with no signs of slowing down any time soon.”
Measuring multi-outlet stores in the U.S., including supermarkets, club, mass, supercenter, drug, military and other retail food stores in February, market research company IRI found continued grocery price inflation over and above the elevated 2020 and 2021 levels. In February 2022, the average price per unit across all foods and beverages was up 10.3% versus the same weeks in 2021, and up 16.8% versus February 2020.
“In our February IRI shopper survey, we found that 90% of shoppers have noticed the price increases across the various grocery departments and a whopping 96% of those consumers are concerned about it,” Jonna Parker, team lead for IRI, said in the report. “In response, 75% of consumers have already made one or more changes to their grocery shopping, up considerably from 64% in January 2022.”
Fresh produce prices are elevated over last year and at a slightly higher rate than total food and beverages, reported Roerink, noting that in February 2022, the price per pound for total fresh produce increased by 10.9% over February 2021. “The latest 52-week look was lower, at 7.6%, given the much milder inflation in the second quarter of 2021,” she reported.
While fruit inflation reached its highest level yet (up 16.1%) in February, fresh vegetable inflation was far below average (up 6.2%), according to IRI data.
“Fresh produce inflation reached double digits and consumers’ concern over these kinds of price increases is shared by the industry,” said Joe Watson, vice president of retail, foodservice and wholesale for the International Fresh Produce Association. “Consumers are focused on finding good prices and promotions and minimizing waste at home, which puts great emphasis on freshness and shelf life in the store. At the same time, consumers balance their spending across canned, frozen and fresh purchases, and many simply buy less to stick to their budgets. Many of the measures pressure volume sales.”
Fresh produce sales reached $5.6 billion in February 2022, and while this figure surpasses the record set in 2021, dollar gains were inflation-boosted and units and volume sales declined year on year, reported Roerink.
“We certainly have to acknowledge that big price increases tend to pressure volume sales,” said Watson. “But it is also important to note that it is hard to measure the effect of supply chain disruption: we cannot sell what we do not have. Out-of-stocks have been a severe problem for departments across the store since the start of the pandemic and fresh produce has also been affected by the labor, transportation and other supply chain issues. Actively communicating and providing recommendations for alternatives are important best practices in case of out-of-stocks.”
A deeper dive into dollar versus volume sales shows that fresh produce pound sales trailed behind year-ago levels all throughout 2021, according to the report. “In January 2022, pound growth dropped to its lowest level since the second quarter of 2021, and the performance worsened in February,” noted Roerink. “While dollars increased by 4.6%, volume dropped by 5.7%, creating a 10.3 percentage point gap between volume and dollars due to inflation, as well as lower levels of promoting.”
A look at the top 10 fresh produce items in terms of dollar gains further reveals rising inflationary pressure.
“The top 10 in absolute dollar gains showed that smaller sellers, limes and mixed fruit, can still be big contributors to department growth,” said Parker. “But more than anything, it shows the impact of inflation. With the exception of mixed fruit and salad kits, all top 10 growth areas had double-digit inflation, led by much higher prices year over year for limes and avocados.
“Meanwhile, salad kits continue to be strong sellers, and I think at-home lunch is an important part of that,” Parker continued. “We still have a lot more people working from home today than we did pre-pandemic and our February survey showed that salads are among the top five things people make for lunch when at home.”
The U.S. Department of Agriculture Economic Research Service’s August consumer price index (CPI) report forecast a low supermarket food inflation rate of 1.5% to 2.5% for 2013, and a slightly higher rate of 2.5% to 3.5% for 2014.
These rates are consistent with USDA’s July report forecast, when the agency dropped its 2013 inflation estimates.
“Most commodity prices other than those affected by the drought have seen moderate inflation or even deflation,” Richard Volpe, USDA research economist, told SN by email.
Fuel price inflation has been low, and the dollar has been strengthening, which has weakened imports for many foods. These are all factors that have contributed to our forecast revision.”
Overall food inflation that includes restaurant prices is expected to range between 1.5% to 2.5% for 2013, which is lower than the historical average of 2.8% for the past 20 years, according to USDA.
For example, the overall food inflation in 2012 was 2.6%, while the rate was 3.7% in 2011.
“In general, the impact of the 2012 drought on food prices has been smaller than expected,” Volpe said.
“For most of this year and last, the PPI [Producer Price Index] for finished and intermediate foods has grown faster than the food at home CPI, suggesting that margins have shrunk and that retailers have been slow to pass on higher commodity costs to consumers,” said Volpe.
Even though the USDA expects inflation for the rest of 2013 to increase at a faster rate than earlier in 2013, this annual rate is not expected to climb higher than 2.5%, according to Volpe. The expected increase in month-over-month inflation is contributing to the 2014 forecast, as well as the USDA leaving room for poor weather.
Compared to July 2012, eggs and produce have had the highest rates of interest so far this year, with egg inflation up 6.8%, fresh fruits up 2.5% and fresh vegetables up 3.6%.