During 2022, the cost of nearly all food and beverages (“F&B”) in the U.S. has been accelerating. Year-to-date through October 2022 (latest available), prices for groceries rose 12.4% compared to the same timeframe in 2021, while the cost of eating out increased 8.6%. Looking at the price tag for some specific products, the cost of eggs rose 43.0% during the first 10 months of 2022, butter was up 26.7%, the bill for flour soared 24.6%, lettuce increased 17.7%, the cost of potatoes jumped 15.2% and poultry prices grew 14.9%. The charge for bread, rice and coffee each rose 14.8%.
The Wall Street Journal (“WSJ”) notes that, in many cases, packaged food companies justified higher price tags on the impacts of inflation—in other words, packaged food companies said increasing the amount they charged consumers was the only way they could recoup the rising costs they had to pay for material costs, transportation and labor.
In response, some consumers altered their shopping habits by seeking out low-cost store brands, forgoing expensive meats, signing up for discount programs and comparing prices between various stores before making a selection. Meanwhile, The Kellogg Company’s (“Kellogg”) CEO Steve Cahillane notes that some consumers’ purchasing patterns changed in 2022 depending on the time of the month. For example, he suggests that some shoppers became more likely to buy family-size products at the beginning of the month because they had more disposable income at that time. However, by month’s end, when they were often short on funds, consumers were often forced to spend more frugally.
That said, packaged food company executives tell the WSJ that rising prices have certainly not resulted in consumers forgoing branded products or “broadly [giving] up their snacks and candy.” Demand remains high for many well-known products, and shoppers continue to purchase their favorite items—even if the cost has increased significantly. For example, Dirk Van de Put, CEO of Mondelez International (“Mondelez”), which makes Cadbury candy and Oreo cookies, reports, “We see the consumer saying that chocolate is really something they cannot live without.” Similarly, the WSJ reports that Kraft Heinz Company (“Kraft”) says shoppers “across all income levels continue to buy the company’s products, which range from pasta sauce to cream cheese,” despite price gains of around 15.0%. In fact, The New York Times (“NYT”) reports that, in general, “food executives have been surprised by how well the higher food prices have been accepted” by consumers.
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