The entire country has been deeply impacted by record-breaking inflation. In the specialty food industry, it has made its way into nearly every aspect of business, from product ideation to on-shelf price and everything in between.
By April, it became apparent that inflation showed no signs of easing, as it was revealed by The Labor Department that it hit an overall four-decade peak of 8.5 percent in March, compared to the same month the year prior. Cost increases for meat, eggs, citrus fruits, wheat, and more led to price hikes in supermarkets, exacerbated by the war in Ukraine's impact on wheat, sunflower products, and fertilizer production.
Joel Brinkeyer, CEO of the Agribusiness Association of Iowa, said in a Wall Street Journal video, “Fertilizer is typically among farmers’ biggest expenses each year, and the rising costs are creating cascading impacts for farmer incomes, crop yields, and food prices.”
Price increases hit a second tipping point in May when grocery prices rose 11.9 percent and restaurant prices jumped by 7.4 percent compared to the year before. Many companies indicated that they were considering innovative ways to offset inflation and mitigate price increases: selling small packages for a higher price per ounce or finding in-house methods to save money by optimizing operations.
Certain segments were especially hard hit including cheese, milk, and yogurt.
“All of these price increases are not only happening in the cheesemakers’ environment, they are happening in the farmers’ environment,” said Mike Koch, president of the American Cheese Society. “So, there is certainly upward pressure on milk prices, and that is, of course, our primary supply input.”
In September, an SFA In The Know webinar education session titled “Navigating Turbulence in Today’s Economy” brought together financial minds from King Arthur Baking Company and Saffron Road Foods to discuss how businesses could weather economic hardships and uncertainty. Presenters shared strategies and tips to mitigate the burden.
Jack Acree of King Arthur shared how the War in Ukraine affected the world’s supply of sunflower seeds and sunflower oil. In an anecdote, he explained how a company, Root 11 Chips, was only using sunflower oil in its product and was forced to switch due to inflationary pressures but faced hurdles because it needed to include the new ingredient on product packaging.
As Halloween neared, candy prices spiked 13.1 percent as compared to the previous year. Hikes in sugar and flour, up 17 percent and 24 percent, respectively, between October 2022 and September 2021, were large drivers.
The largest U.S. outbreak of bird flu in the past seven years meant chicken, turkey, and egg prices were on the rise for most of the year. By Thanksgiving, the average price of turkey increased by 73 percent from the previous year. November data found that 47.6 million birds had been affected by the virus across 42 states.
In December, L.E.K. Consulting released a report analyzing data from over 2,500 Americans, finding that 85 percent believe that inflation has had a moderate or large impact on their day-to-day life. Moreover, 90 percent said that it has changed how they spend on food, beverages, cars, and gas.
“A huge group of Americans has felt an effect in their lives from inflation,” said Chris Randall, L.E.K. managing director, in a statement. “This cuts across income levels and generations and is directly affecting how consumers are spending their money. Decision-makers across consumer-facing industries should keep this in mind as they plan strategies for 2023.”
Because of rising prices at restaurants, 60 percent of those surveyed said that they'd eat out less frequently. At the grocery store, consumers traded down grocery items for budget-friendly alternatives.
December data also found that November saw inflation slow; however, it remained relatively high. Overall food inflation grew 13.2 percent versus one year ago, yet monthly increases compared to last year have leveled off over the last four months, according to data from IRI. Between November and October, some categories even became cheaper, like root vegetable prices declining by 7.2 percent, bacon by 3.4 percent, and butter /margarine/spreads by two percent.
Department of Labor data corroborated the price moderation, finding a 7.1 percent increase in inflation in November compared to the same time last year, 0.6 percent lower than the same evaluation in October.
After supply chain bottlenecks began to improve since their yearly peak this summer, inflation has eased. Mike Smith, owner of agricultural-packaging company Griffith Bag Co, told The Wall Street Journal that the supply challenges that have caused business difficulties over the last two years are on the decline.
Related: Bird Flu Causes Egg Prices to Surge; Instacart Discounts Instacart+ for SNAP Participants