Should grocers get comfortable with food inflation?
Nicholas Bertram, president of The Giant Company, in a column for CNN warns that food prices are at their highest levels in a decade, inflation pressures have accelerated in recent months and “there does not appear to be any real deflation on the horizon.”
“At Giant, we are trying to absorb as much of these higher costs as we can to avoid passing them on to customers and protect them from more frustration,” he wrote.
The U.S. Chamber of Commerce (USCC) said food prices at grocery stores were up 5.3 percent through October year over year, well above annual increases of 1.3 percent during the decade prior to the start of the pandemic.
The lobbying group cited four factors driving food inflation:
- Labor shortages: The pandemic has exacerbated shortages of dock workers and truck drivers. Companies are competing heavily to attract workers, offering enhanced bonuses and benefits.
- Supply chain disruption: Food shipments, such as pork from overseas, have experienced delays, but the bigger food sector hurdle is attaining aluminum, cardboard and other packaging materials. Domestically, overtime costs to catch up for last year’s plant shutdowns are escalating meat prices.
- The energy crisis: A confluence of factors, from extreme weather conditions to increased demand, “is causing a national energy crisis of sorts,” according to the USCC. The American Petroleum Institute estimates that energy accounts for between 20 percent and 30 percent of absolute agriculture costs.
- Higher wages, more demand: Due to pantry-loading habits begun at the pandemic’s start, stimulus checks, higher wages and other factors, demand for food has increased, thereby also elevating prices.
To combat higher prices and food shortages, Mr. Bertram said Giant is sending products from warehouses to stores earlier than needed and in larger quantities to reduce truck trips. Giant and Martin’s stores are encouraging shoppers to use the Flashfood app, which allows them to purchase fresh food nearing its best-before date at significantly reduced prices. The chains are also bringing in products from both new and local suppliers and encouraging customers to be flexible and purchase only what they need.
“If we’ve learned anything over the past nearly two years, it’s how resilient each of us can be,” he wrote.
- Grocery store CEO: How we’re dealing with food shortages and higher prices – CNN
- 4 Factors Driving Food Price Inflation – U.S. Chamber of Commerce
- Will American consumers push back against higher grocery prices? – RetailWire
DISCUSSION QUESTIONS: Do you see a temporary or extended period of inflationary pressures impacting the food sector? What mitigation measures can grocers take to ease the burden on customers and their margins?