Persistent Inflation Distresses Food Industry

Grocery sales in 2023 were hit by both inflation and the expiration of pandemic era benefits, reports The Wall Street Journal. The repercussions have persisted with companies including Campbell Soup and J.M. Smucker recently reporting signs of customer caution in select categories.

Although dollar sales in grocery are up three percent in the 52 weeks through May 25, unit volumes fell 1.9 percent, according to data from NielsenIQ. In the same period last year, dramatic price hikes drove up dollar sales by 11.8 percent as volumes dipped three percent. Analysts citing more granular, recent proprietary data from NielsenIQ say volumes continue to fall year-over-year for select categories, according to the report.

Carman Allison, VP of global thought leadership at NielsenIQ, said that even though inflation has slowed, food prices are leveling off at record levels, roughly 33 percent higher than before the pandemic. The heightened prices are bolstered by large pandemic and post-pandemic swings.

“There has been this compound effect as it relates to inflation over the last couple of years. I kind of think of this as the inflationary ball and chain that the consumer is still carrying around,” said Allison.

Internationally, world food prices are experiencing their third consecutive month of increases, according to the United Nations, reports Reuters.

The U.N. Food and Agriculture Organization's price index, which tracks the most globally traded food commodities, averaged 120.4 points in May, up 0.9 percent from April, the FAO said today. The May reading, however, is 3.4 percent cooler than the same time last year.

The jump in May was pushed up by cereal prices rising 6.3 percent month-over-month amid growing concerns about unfavorable crop conditions hampering 2024 harvests in key areas including northern America, Europe, and the Black Sea region, according to the report.