Sunday, June 14, 2020

Fastest-Rising Food Prices in Decades Drive Consumers to Hunt for Value

Food makers, retailers respond by restoring promotions, bundling products to help offset biggest price jump since 1970s

Annie Gasparro and Jaewon Kang. They mention shortages of meat below. But a shortage means that the price is below where supply and demand intersect and the quantity demanded is greater than the quantity supplied. If price goes up because supply decreased there is no shortage. Yes, the equilibrium quantity might be less than it used to be. But that is not a shortage.


"Food makers are designing value packs, and supermarkets are restoring promotions, aiming to offset disruptions wrought by the coronavirus pandemic that have led to the fastest rise in food prices in more than four decades.

While food companies and supermarkets say they have reopened plants and resolved supply constraints that contributed to higher prices, they also expect prices to remain elevated because of increased costs for labor and transportation. Companies are buying equipment and reconfiguring factories and stores to keep people safe from the new coronavirus. Some of those changes are adding costs that are trickling down to shoppers [when it costs more to produce a good, its supply decreases]."

"Prices for store-bought food rose a seasonally adjusted 2.6% in April from a month earlier, according to the Labor Department, the biggest monthly increase since 1974. The department is due to release figures for May on Wednesday, and many economic analysts expect it to be a sharper increase than April [The cost of food bought for home consumption climbed 1% in May]. Market-research firm Nielsen said food prices rose 5.8% in the 13 weeks from March 1 to May 30 compared with the year-ago period."

"The jump in meat prices has propelled the overall increase in food prices. The pandemic has disrupted meatpacking plants, creating shortages of meat and pushing up prices. While the meat supply is improving, promotions are still hard to find, and prices remain high, retailers said. Meat prices rose 15% in the week ended May 23 from the prior year, according to Nielsen.

Transportation and logistical costs for food makers are rising, too. With most air traffic canceled, Be Well Nutrition Inc., maker of protein-drink brand Iconic Protein, recently chartered a plane to pick up its main ingredient, grass-fed milk protein, from Ireland."

"Grocery costs also rose because food makers and supermarkets have pulled back on the discounts they typically apply to about a third of the items they sell. Consumers are finding some 28% fewer discounts, according to Nielsen, because manufacturers are focused on their top sellers, grocers said."

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