US grocers hit hard by rising inflation
With commodity prices soaring due to the COVID-19 pandemic and supply chain disruptions, inflation has hit grocery stores across the United States as brands increase product prices to prevent corporate profits from shrinking.
P&G, which sells skin care products, shampoo, nappies and toothpaste, raised product prices by 5 percent to achieve 10 percent sales growth in the first three months of 2022. The bottled water and yogurt company Danone achieved its sales growth target in the first quarter by transferring some costs to Client. Heineken brewer’s “resolute pricing” helped drive net revenue growth of 24.9% over the period, according to Fortune.
The Consumer Price Index (CPI), a measure of inflation, rose 1.2% in March, according to data (pdf) from the US Bureau of Labor Statistics. The 12-month inflation rate was 8.5 percent, the highest since December 1981. The food-at-home index rose 10 percent last year, the largest increase since March 1981.
Retail sales rose in March according to the National Retail Federation (NRF). This shows that customers have maintained their ability to spend despite many issues such as inflation, geopolitical turmoil and supply chain crises, Matthew Shay, President and CEO of NRF, said in a press release on April 14.
Consumers are adapting and shopping smarter for themselves and their families. “We believe consumer strength can carry the economy through this significant economic uncertainty if policy makers implement measured policies and do not overreact to current conditions,” Shay said.
High inflation is not looking to abate anytime soon. Analysts at Bank of America recently said in a note that they expect food inflation in the country to reach 9 percent by the end of this year.
“Looking forward, we believe consumers will continue to feel the distress of high food inflation,” the analysts wrote. “While there has been a great deal of interest in the shock caused by the conflict between Russia and Ukraine, we believe it is too early to see the impact at the grocery store…instead, it should lead to sustained price increases later this year.”
The brand that previously raised prices and plans to continue the strategy is Nestlé, the world’s largest food and beverage company. In the first quarter, it passed on higher production costs to shoppers by increasing the prices of finished products by more than 5 percent. The hardest hit were consumers in North America, who saw label prices rise 8.5 percent.
“We have raised prices in a responsible manner and have seen sustained consumer demand. Cost inflation continues to increase sharply, which will require further pricing and easing measures throughout the year,” the CEO said in a press release on April 21.