Here are some basic food shopping realities, according to the Wall Street Journal:
“Over the 12 months ended in August, the price of coffee increased 20.9%, Labor Department data showed; ground beef was up 12.8%, and bananas rose 6.6%. Dairy, fruits and vegetables and cereals have all become pricier.
“Ground-roast coffee in August hit $8.87 a pound on average, jumping nearly $1 since May. Ground-beef prices added about 30 cents over that period, rising to a record $6.32 a pound, and steaks were up by more than $1 a pound.
“Rising commodity prices are driving some of the increases, including American beef. Tariffs imposed by the Trump administration have separately raised the cost of importing a variety of goods, from Spanish olive oil to Guatemalan bananas to shrimp from Vietnam. Some of these costs have been absorbed by food companies; others are being passed on to consumers.”
Industry insiders say that these realities are forcing shoppers to make choices:
• “Albertsons Chief Executive Susan Morris said on a Tuesday earnings call that shoppers were choosing smaller package sizes and using more coupons to reduce their grocery bills. She said the supermarket company is looking to cut costs to help counter inflation.”
• “Brendan Foley, CEO of McCormick, the spice company, said consumers, especially in low- to middle-income households, are shopping more strategically—making more-frequent trips with fewer items in a basket. ‘They continue to cook at home more often and shop the perimeter for fresh foods to help lower overall meal costs,’ Foley said on an earnings call this month.
• “Dirk Van de Put, CEO of Mondelez International, the Oreo maker, said shoppers haven’t boosted their spending for 2½ years, even as prices have gone up, meaning that they are buying less. ‘They have no inclination to increase their spending,’ Van de Put said. ‘They’re unsure about what’s going to happen, when those tariff effects really are going to hit them’.”
KC’s View:
“No inclination to increase their spending” sounds like the understatement of the year.
So much of this would seem to benefit retailers such as Walmart, Aldi, Lidl, and Dollar General, all of which have planted their flags firmly on the value-driven side of the retailing fence.
Inevitably, this all is going to lead to greater private label penetration (Albertsons says it is targeting 30 percent, for example), probably more coupon distribution and usage, less restaurant spending and more at-home cooking, and, if retailers are smart, more savvy usage of their email lists and frequent shopper data.
I do think, however, that retailers have to resist the impulse to focus exclusively on efficiency and price. They also have to look for ways to differentiate themselves in the marketplace – and I remain absolutely convinced that this means becoming more focused on food.
For retailers, especially those that don’t have the scale to battle financially with their larger and lower-priced competitors, finding ways to bring greater focus to the food could be key to survival.
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