by Jim Dudlicek / NGA Director, Communications and External Affairs
Inflation isn’t really helping anybody, but there’s a little good news for grocers: Dining out tops the list of consumer cutbacks.
Unfortunately for basket rings, non-essential food is second on the household hit list as folks try to offset the rising cost of things they need most.
That’s according to the recent New Realities & Routines study from market research firm Numerator, which looks at inflationary financial realities and post-pandemic routines.
The Numerator study looks at how consumers are coping with the rising of food. The Bureau of Labor Statistics reported inflation for food at home hit 11.9 percent in May, a new 40-year record, amid an increase in overall consumer prices of 8.6 percent against a year-over-year bump in average hourly earnings of just over 5 percent.
Most independent grocers are already deeply engaged with their communities, so they know everyone is hurting, consumers and merchants. But these latest findings should provide a deeper understanding of the decisions that folks are being forced to make and how grocers might continue to find innovative solutions for stretching weekly food budgets.
Numerator reports that 95 percent of consumers say inflation has impacted their finances and 40 percent of consumers expect that impact to worsen over the next few months. Nearly all households are taking steps to combat rising prices, such as searching for coupons and promotions and stocking up on sale items, but those most struggling are cutting back on non-essential spending. After dining out and non-essential food, they’re axing clothing, recreation and travel.
Despite this level of impact, 55 percent of all consumers told Numerator they have a “somewhat” or “very positive” outlook for their future.
Such a positive outlook may take some of the heat off retailers, who frequently – and unfairly – get the lion’s share of the blame for high prices and often are accused of gouging. Admittedly, consumers have a difficult time grasping how retail grocery pricing works, to the extent that many grossly overestimate grocers’ margins. That’s why transparency and trust are paramount to the retailer-consumer relationship.
It’s an opportunity to educate your customers, although the current lessons can be mind-boggling. Producer prices for final-demand foods were up 13 percent year over year in May, according to the Bureau of Labor Statistics. Eggs continue to lead the way; wholesale egg prices rose nearly 185 percent over year-ago levels (with a month-over-month decline of 0.3 percent).
Meat’s a mixed bag, depending on the protein. Beef and pork fell month-to-month and year-over-year; beef prices were down 14 percent on the year, with pork prices down more than 5 percent. Meanwhile, who would have ever thought chicken would be a trade-up? A 4.6 percent month-to-month jump in chicken prices drove a year-over-year climb of nearly 21 percent.
Few categories have been left unscathed, with year-over-year leaps in fresh and dry vegetables (41.7 percent), shortening and cooking oils (33.2 percent), pasta (24.3 percent), dairy (20.1 percent, casting a shadow on traditional June Dairy Month promotions), seafood (19 percent), fresh fruits (18.5 percent) and roasted coffee (13.8 percent).
Lessons in Logistics
While it’s difficult to quantify exactly how much of food price increases can be blamed on surging fuel prices, the Bureau of Labor Statistics offers a clearer picture of the impact transportation costs are having on the supply chain.
Prices to transport freight by truck jumped nearly 26 percent during the year ending in May, 3% alone between April and May. The bureau called transportation costs a key contributor to overall producer price inflation of 10.8 percent in May. According to Consumer Brands Association CEO Geoff Freeman, “Out-of-control wholesale costs are the origin of pricing frustration rippling through the economy right now.”
So, the perfect storm engulfing the supply chain continues to swirl, encompassing labor issues, fuel prices, lingering pandemic slowdowns, unrest in Eastern Europe, extreme weather, and export bans on wheat and palm oil from India and Indonesia.
According to MassMutual’s Consumer Spending and Saving Index, Increased gas and grocery prices have Americans rethinking everything from summer camp to home repairs.
“It appears this summer will not be a return to normal,” said Mike Fanning, head of MassMutual U.S. “Americans will have to grapple with stubborn inflation, and business owners will likely continue to see uneven results, all while the specter of COVID still looms.”