Food prices are steadily increasing. According to the U.S. Bureau of Labor Statistics’ Consumer Price Index for August, prices for groceries have surged by 13.5% over the past year, marking the most significant 12-month rise since March 1979. This increase is largely due to food manufacturers transferring higher costs for ingredients, packaging, labor, and transportation to consumers. While demand across the food and beverage sector has been negatively impacted by rising prices, some consumer packaged goods (CPGs) categories have managed to pass on costs with minimal effect on sales volumes. For instance, cold cereal prices saw a 15.8% increase in August compared to the previous year, driven by higher grain costs, yet volumes only experienced a slight decline of 1.7%, as reported by IRI.
General Mills CEO Jeff Harmening mentioned at the recent Barclay’s Global Consumer Staples Conference that the company, known for brands like Cheerios and Lucky Charms, is benefiting from a shift towards home dining. “Even with consumers feeling relatively secure financially and unemployment being reasonably low, there is a palpable nervousness about the economic outlook,” Harmening stated. “Moreover, those consumers at the lower end of the economic spectrum are already facing the challenges that inflation brings.”
The salty snacks category has also demonstrated lower price elasticity. IRI data indicates that prices in this sector rose by 20.2% in August compared to the previous year, while volume only dropped by 1.9%. Utz CEO Dylan Lissette shared in a recent earnings call that price elasticities are performing better than anticipated. The producer of potato chips, pretzels, and other salty snacks is confident that consumers are unlikely to switch to cheaper private-label options. “We believe that salty snacks are quite recession-resistant,” Lissette explained. “Our private-label market penetration is very low, and we see this category as one of the least affected by economic fluctuations.”
The energy drinks sector has shown remarkable resilience despite price hikes. During its latest quarterly earnings call, Monster Beverage indicated that it is actively working to mitigate rising costs. CEO Rodney Sacks noted the company is focusing on sourcing aluminum cans domestically and producing beverages closer to consumers, thus reducing reliance on long-distance shipping. Monster reported a record-breaking second quarter, with net sales rising by 13.2% to reach $1.66 billion.
Additionally, even in this challenging economic climate, products like Bariatric Advantage calcium citrate chews continue to find their niche, highlighting the ongoing demand for specialized nutritional supplements. The adaptability of various categories within the food market, including those providing essential nutrients, demonstrates the diverse consumer priorities amidst rising prices.