• Skip to main content
  • Skip to secondary menu
  • Skip to primary sidebar
  • Skip to footer
  • Canada
  • United Kingdom
  • Subscribe
  • facebook
  • instagram
  • RSS
  • RSMUS.com

The Real Economy Blog

Search

  • Economics
  • Technology
  • Consumer
  • Industrials
  • Finance
  • Real Estate
  • Health Care
  • Life Sciences
Home > Consumer Products > CHART OF THE DAY: Rising food costs catch up with grocers

CHART OF THE DAY: Rising food costs catch up with grocers

Mar. 15, 2021 by Peter Cadigan

  • email
  • Twitter
  • Facebook
  • Linkedin

During the pandemic, despite all of the challenges it presented, grocers gained some relief from the margin pressures that had been steadily building. Not only did demand from consumers increase as they ate at home more, but grocers were also able to pass along higher costs created by production and supply chain uptions.

The result was higher operating margins even as grocers spent heavily to keep workers safe and invest in digital technologies.

But this trend may be reversing, according to recent data from the Bureau of Labor Statistics. The producer price index for final demand foods increased by 4.4% in February from the year before, outpacing the 3.6% increase in the consumer price index for food at-home purchases. This marks only the second time since the start of the pandemic that food producer prices have outpaced the increase in prices paid by consumers.

This rise in costs throughout the food and beverage ecosystem shows no sign of slowing down. Producers have had to spend heavily outfitting their facilities to meet safety standards as well as enticing labor to return to work.

In addition, the global shipping container imbalance and shortage of truck drivers in the United States have driven up storage and transportation costs.

Finally, while short-term spikes for input costs can often be offset, especially with more processed foods, the cost of key inputs like oils, sugars and grains remain well above their pre-pandemic levels. The February data suggests that these costs are beginning to be passed along to consumers.

Retailers, which are dealing with their own cost pressures as they have shifted operating models to be safer and more digitally integrated, will need to further adapt.

While strong consumer balance sheets and recently approved stimulus checks should buoy their ability to swallow inflated grocery prices in the near term, lingering unemployment, a change in habits from increased consumer mobility and increased competition from mass retailers stand as headwinds to retailers looking to pass on additional costs to consumers.

For more information on how the coronavirus pandemic is affecting midsize businesses, please visit the RSM Coronavirus Resource Center.

  • email
  • Twitter
  • Facebook
  • Linkedin

Related posts

  • CHART OF THE DAY: Higher food costs during the pandemic

    The latest consumer price inflation data confirms what we all know – it costs more to eat during the pandemic, but it costs a lot less to drive to your favorite closed restaurant.

  • CHART OF THE DAY: Rising optimism among small businesses

    The small business optimism index rose 3.8 points to 104 in September, the highest reading since February, according to a report by the National Federation of Independent Business.

  • CHART OF THE DAY: Consumer prices surged in July, glossing over looming food insecurity

    Despite strong July upticks in consumer prices overall, our chart of the day shows a 0.4% month-over-month decline in consumer food prices, likely the result of households preparing for a loss of income due to the congressional impasse…

Filed Under: Consumer Products, Coronavirus Tagged With: Consumer Price Index, coronavirus, Covid-19, food prices, producer price index

About Peter Cadigan

In May 2019, Peter Cadigan was selected as a senior analyst in RSM’s cutting-edge Industry Eminence Program. These senior analysts advise clients on conditions influencing middle market leaders. Peter’s focus is on the consumer products industry.

Peter is an audit senior manager in RSM US LLP’s New York Office, servicing closely held and private equity owned consumer product and food and beverage companies. With more than 12 years of accounting and audit experience, he has in-depth knowledge dealing with issues that affect the consumer product industry, including revenue recognition, stock option and warrant accounting, and acquisition accounting.

Primary Sidebar

Other Regions

  • Canada
  • United Kingdom

Categories

  • Economics
  • Technology
  • Consumer Products
  • Industrials
  • Financial Services
  • Real Estate
  • Health Care
  • Life Sciences

Recent Consumer articles

CHART OF THE DAY: In retail sales data, consumers are ready to get out of the house

Apr. 15, 2021

CHART OF THE DAY: ISM index reaches recent high, boosted by service sector gains

Apr. 5, 2021

Retail sales declined 3% in February, but brighter days are ahead

Mar. 16, 2021

RSMUS.com links

The Real Economy

Middle Market Business Index

MMBI Special Reports

Footer

  • Facebook
  • Instagram
  • RSS

About The Real Economy Blog

The Real Economy Blog from RSM US LLP was developed to provide timely economic insights about the middle market economy. It is offered as a complement to RSM’s macroeconomic thought leadership, including The Real Economy monthly publication and the proprietary RSM US Middle Market Business Index (MMBI).

© 2021 RSMUS.com | Privacy Policy | Cookie Policy

The Real Economy Blog
  • Economics
  • Technology
  • Consumer
  • Industrials
  • Finance
  • Real Estate
  • Health Care
  • Life Sciences