Rising Food Retail Prices Could Turn Consumers to Value Purchases
Food prices are on the upswing, and in many cases that trend will continue through the rest of the year, putting more pressure on retailers to provide value to customers.
The latest figures from the U.S. Department of Agriculture (USDA) show that for 2020, “food-at-home prices (that is, grocery, supermarket and other food retail prices) are now expected to increase between 2.5% and 3.5%. Food-away-from-home (that is, restaurant) prices are still expected to increase in a range between 1.5% and 2.5% in 2020.”
So far this year, food-at-home prices have increased by at least 2.4% compared to the same period in 2019, while food-away-from-home prices have increased 2.1%. The price jumps are especially high for such product categories as meat, poultry, fish, eggs and fresh fruit, the USDA said.
“Processors have implemented health protocols for dealing with COVID-19 that might have hindered their ability to process cattle and hogs, although they have recouped much of the lost slaughter capacity,” the federal agency said. “With some exceptions, most fresh-market vegetable growers rely on human labor to produce and place a crop into supply channels. It is anticipated that skilled labor will be scarcer and procedural changes to comply with recommended social distancing may reduce productivity.”
The new food price report from the USDA comes amid increasing research that consumers are facing tight budgets for the remainder of 2020, a situation that could drive them to focus much more on value when it comes to food and other retail purchases.
For instance, take the report released by IRI in June entitled “The Changing Shape of the CPG Demand Curve — Tracking Transformation of the Retail Landscape.
It showed that while consumers turned to such comforts as ice cream, alcoholic beverages and cigars in the first phases of the pandemic, the second half of 2020 could bring a renewed consumer focus on value and more desire for away-from-home retail trips and similar experiences. “As economic stimulus and extra unemployment support run out/ decrease, value seeking and in-home consumption increases,” IRI said.