Schuster’s Blog – Rising food costs | Society for Nutrition Education and Behavior (SNEB)

Schuster’s Blog – Rising food costs

Posted by: on Sunday June 5, 2022

by SNEB member Ellen Schuster,  MS

Every day sees rising food costs prompting questions: Are companies raising prices because they can? Will prices ever go down/return to ‘normal’? (Takeaway: Maybe not if you read the section below ‘a different take on rising prices’.) Amid this backdrop is a report: 62 new ‘food billionaires’ were created from pandemic profits (https://www.businessinsider.in/thelife/news/rising-food-prices-made-62-new-food-billionaires-and-the-dynasties-could-get-richer-this-year/articleshow/91738259.cms). On the horizon: will dockworkers at 29 ports strike on July 1?  (https://www.bloomberg.com/news/articles/2022-05-25/busiest-us-ports-seek-to-avert-2014-cargo-chaos-amid-wage-talks).  Lastly, a Dutch non-profit calculates the ‘true cost’ of products and one grocery store’s adoption.

RISING FOOD COSTS

Shopper buying habits: Walmart shoppers are switching away from: deli, lunch meat, dairy, bacon and name brands (https://www.retaildive.com/news/walmart-profits-take-hit-fuel-costs-spike/623876/). FMI shares 2022 first quarter buying habits: less chicken, beef, more rice (https://www.fmi.org/blog/view/fmi-blog/2022/05/20/how-are-increased-prices-changing-consumer-behavior); their 2022 report on shopping trends – more people buy food at wholesale clubs and dollar stores (https://www.tastingtable.com/878096/new-research-shows-rising-gas-prices-affect-where-people-shop-for-food/). No wonder that Dollar General plans to open an average of 3 stores/day with a focus on small towns  (https://www.forbes.com/sites/laurendebter/2022/05/20/dollar-general-opening-new-stores-across-small-town-america/). Food costsBaby formula shortage and eBay/Craigslist price gouging (https://www.technologyreview.com/2022/05/18/1052405/baby-formula-shortage-online/). Salmon prices may soon increase, in part, due to rising temps (https://www.tastingtable.com/877440/why-the-price-of-salmon-may-soon-increase/). Avocado prices soar: $40/box last year, now $78 (https://www.cnn.com/2022/05/05/business-food/avocado-prices/index.html). May 2021 to May 2022 price increases (14.3%) seen for meat, seafood, poultry, eggs while fruits/vegetables increased 7.8% (https://www.tastingtable.com/880801/what-the-latest-usda-predictions-say-about-food-inflation-in-the-us/). Groceries: Interactive ongoing tracking of the average prices of 6 food items since April 2021 – OJ, eggs, chicken breasts, fresh ground beef, bacon, bread – in selected metro areas (https://www.nbcnews.com/business/business-news/graphic-track-grocery-price-trends-n1264037); Consumer Price Index data (https://www.ers.usda.gov/data-products/food-price-outlook/summary-findings/). Which groceries got more expensive this past year and by how much; which got cheaper (doughnuts, peanut butter, ham) (https://www.cnn.com/2022/04/13/business/grocery-prices-march/index.html). Ukraine conflict sees hike in cooking oil prices (https://www.npr.org/2022/04/26/1094770364/russias-invasion-of-ukraine-heats-up-cooking-oil-prices-in-global-squeeze). Indonesia lifts palm oil exports (https://www.fooddive.com/news/indonesia-palm-oil-producer-to-ban-exports/622572/). Giant Eagle loyalty members to get 20% off on selected items (https://progressivegrocer.com/giant-eagle-gives-shoppers-break-grocery-prices). Which grocers had the most expensive staples – 4 Midwest/coastal grocers were compared in a non-research study: prices were within small price ranges across stores in the different locations, Trader Joe’s prices were the highest including prices for sugar, flour, white bread, chicken breasts; Walmart’s eggs were the most expensive (https://grow.acorns.com/aldi-trader-joe-walmart-target-where-do-staples-cost-most/). School meals: Supply chain issues force some to buy items at retail prices, inflation, meal waivers with generous reimbursement rates set to expire the end of June (https://www.usnews.com/news/education-news/articles/2022-05-26/its-going-to-be-catastrophic-schools-brace-for-crisis-over-meal-programs. One Nebraska district has seen rising costs: ketchup, up 40%; cereal 20%; yogurt 18%; chicken thighs 13%; plans for across-the-board increases in food costs of 10 to 15% for the 2022-2023 school year (https://journalstar.com/news/local/education/everything-is-going-up-lincoln-school-kitchens-feeling-pinch-of-rising-food-prices/article_01495659-1142-5549-8b58-b832cc912b75.html); in North Carolina, food costs have risen 30% – 40%(https://www.carolinacoastonline.com/news_times/article_7e8df198-c736-11ec-a4c5-dfceb0b827c1.html). Small crops/restaurant costs: Midwest drought and floods signal continued high bread prices (https://www.tastingtable.com/880083/why-the-us-may-continue-to-face-issues-with-its-wheat-supply/). World wheat harvest projections for the coming year projected to be low (https://www.fooddive.com/news/wheat-stocks-6-year-low/623772/). A smaller Florida orange crop – the smallest since 1943 – and Brazil which will mean higher prices (http://www.bnnbloomberg.ca/orange-crop-killer-and-frosts-strain-world-s-dwindling-juice-supply-1.1752345). Chefs and others seek substitutions for avocado in guacamole because of cost and sustainability using fava beans, frozen peas and Jerusalem artichokes  (https://www.theguardian.com/food/2021/nov/01/end-of-the-avocado-why-chefs-ditching-the-unsustainable-fruit). Noodles & Company adds temporary $1 surcharge to dishes with chicken as costs increased 70% in their first quarter compared to 2021 and expect increased costs ahead (https://restaurantbusinessonline.com/financing/chicken-prices-are-causing-big-headaches-noodles-company). Foraging and rising food costs: Increased foraging in New Zealand (https://www.rnz.co.nz/news/national/464532/more-people-gardening-and-foraging-in-canterbury-as-living-costs-rise). Foraging BIG on TikTok (https://tastecooking.com/it-was-a-big-year-for-tiktok-foraging/). Foraging resources/tips: (https://health.clevelandclinic.org/foraging-101-what-to-eat-and-avoid/); (https://ice.edu/blog/how-to-safely-forage); (https://www.ciafoodies.com/spring-plant-foraging-for-beginners/); (https://www.healthline.com/nutrition/foraging-for-food);  (https://www.washingtonpost.com/food/2022/04/07/alexis-nikole-nelson-foraging-tips/); (https://www.bonappetit.com/story/spring-foraging-guide).

THE INTERSECTION OF FOOD & GAS

Drive-thru times increase: Fast food drive-thru times have increased – 2021 average wait time over 6 minutes   (https://thetakeout.com/you-re-wasting-time-at-the-drive-thru-1848909075). Author comment: That’s a lot of gas being wasted! Reduced gas price w/Walmart+ membership (https://www.retaildive.com/news/in-challenge-to-costco-walmart-boosts-fuel-discounts-at-thousands-more-ga/622781/); Dunkin’ partners with Shell to save 10 cents per gallon of gas (https://news.dunkindonuts.com/news/shell-and-dunkin-announce-partnership-and-loyalty-promotion-through-fuel-rewardsR-program).

A DIFFERENT TAKE ON RISING PRICES

Ever increasing food/other prices prompted questions about how much the rise in prices is due to supply/labor shortages, transportation issues and other factors. Are some companies using rising food prices to increase corporate profits more than usual? It is difficult to draw a straight line from rising prices to actual costs. Legally there are no federal price gouging laws and raising prices/making a profit is NOT price gouging. In the marketplace, companies don’t set prices, retailers do. Competition or the lack of it affects market prices and some markets are controlled by a handful of companies. In the following articles (and 1 podcast) are troubling examples: 1) investor call transcripts show companies boasting about increasing prices  increasing profit margins; 2) detailed data on 20 Fortune 500 companies (many are food companies) and their profit margins; 3) a survey of retailers finds many say higher prices are going to boost corporate profits; 4) an opinion writer cites Starbucks’ 31% increase in profits in the last quarter of 2021 yet plans to raise prices in the future; and 5) one journalist’s estimate that 60% of higher prices go to corporate profits and not to offset global supply chain issues/higher costs. Recent research looks at the decrease in consumer price sensitivity in the years before the pandemic – price sensitivity is when consumers shift buying due to price hikes – 2021 was the most profitable year for US companies since the 1950s due to efficient production yet lower prices were not passed on to consumers. In fact, recent research shows price markups (the difference in prices charged and marginal costs to make a product) went up about 25% in the years 2006 to 2019. Consumers kept buying their favorite brands and were 30% less price sensitive in 2019 when compared to 2006 – interestingly, there was a drop in the use of coupons during this same time period. And the researchers note that companies observe decreased consumer price sensitivity and conclude that even though they are more efficient in production/realize cost savings they can continue to raise prices without consumer abandonment of their brands (https://hbswk.hbs.edu/item/why-companies-raise-their-prices-because-they-can). Listen to the podcast/read the articles that follow and draw your own conclusions/form your own questions: What Next podcast, May 17, 2022, 28 minutes: How corporations are taking advantage of inflation – hear the audio from some shareholder phone calls (https://www.listennotes.com/podcasts/what-next-daily/how-corporations-are-taking-G6qtXgRmr_p/); (https://www.minnpost.com/community-voices/2022/03/its-not-just-inflation-its-price-gouging/); (https://fortune.com/2022/02/19/inflation-profits-prices-companies-pandemic/); (https://www.businessinsider.com/how-measure-inflation-raise-prices-corporate-profits-supply-chain-2022-2); (https://digital.com/half-of-retail-businesses-using-inflation-to-price-gouge/); monopolistic price gouging (https://time.com/6139127/u-s-food-prices-monopoly/). At a Congressional hearing meatpackers push back against price-fixing charges (https://www.fooddive.com/news/meatpackers-push-back-against-lawmakers-price-fixing-charges/622930/). Tyson substantial profits rise amid questions of the industry price increases (https://www.fooddive.com/news/tysons-sales-13b-meat-profits/623470/).

HOW MUCH DO FOODS REALLY COST?

Imagine walking into a grocery store and seeing prices that reflect the ‘true cost’ of items. True Price, a Dutch non-profit, calculates the cost of growing, transporting, carbon emissions, worker wages and more. In 2020, an Amsterdam grocery store began sharing the ‘true cost’ price along with the regular price (https://www.newyorker.com/business/currency/how-much-do-things-really-cost).