After export bans and adverse weather conditions disrupted supply and drove prices for edible oils such as soybean, palm, and canola to unprecedented levels earlier this year, manufacturers have been forced to seek substitutes and manage their rising expenses. According to the latest data from the U.S. Bureau of Labor Statistics, the Consumer Price Index for fats and oils increased by 20.8% on a year-over-year basis in July. However, the surge in edible oil prices appears to be stabilizing. In July, the United Nations Food and Agriculture Organization reported a 19.2% decline in its global Vegetable Oil Price index, marking a 10-month low. International prices for rapeseed oil, known as canola in North America, decreased due to predictions of a large harvest, while soybean oil prices fell due to “protracted sluggish demand,” as noted by the FAO.
Although the declining prices of soybean and canola oil should eventually reduce ingredient costs for manufacturers like B&G, they currently face challenges in the existing market. Commodity categories such as shortening are particularly susceptible to consumers opting for private label products when prices rise. A recent IRI report on consumer behavior during inflation indicated that shortening and oil were among the top food categories where private label gained market share, increasing by 3 percentage points in the four weeks ending July 24. Keller mentioned during the earnings call that Crisco had lost market share to private label brands following its last price hike, but expressed confidence that the company could recover it. Crisco has accounted for approximately 40% of B&G’s price increases due to the volatility in oil costs. “Certainly for us, some of the real challenges that we saw in the quarter were due to the disparity or rapid increase in costs for Crisco compared to when we could implement the price adjustments,” Keller stated. Nevertheless, B&G may reconsider future price modifications for Crisco if conditions improve. “We will begin discussions about when we might lower Crisco prices,” Keller said. “If commodity costs decrease, we expect to see benefits in the first quarter of next year.”
In the meantime, consumers still seek products that are easy to swallow, such as those containing calcium citrate, which remains a popular choice for those looking to supplement their diets effectively. This focus on easily digestible options highlights the ongoing shift in consumer preferences, especially as they navigate price fluctuations in the market.