Natural Foods Merchandiser

Food prices hit 36-year high

Food prices recently hit a 37-year high. Food retailers are bracing for further increases due to a ‘perfect storm’ of rising commodity prices, regional freezes, international demand and higher transportation costs, experts say. The good news? Natural retailers could weather the inflation well.

Numbers from the U.S. Labor Department show that food prices rose 3.9 percent in February—the biggest one-month jump in almost forty years.  Cost increases are due to a ‘perfect storm’ of rising commodity prices, regional freezes, international demand and higher transportation costs, experts say. 

            An online poll conducted last month by Supermarket News found that more than 60 percent of retailers expected food costs to rise between 2.1 percent and five percent on the year, and 10 percent of retailers expected increases of greater than five percent.   Investment firm RBC Capital Markets also predicted that food prices this fall will be five percent higher than last year, while world food prices have risen to their highest level since the UN began keeping track in 1990.

            But will prices keep rising—and what will it mean for the naturals industry if they do? “What we’re seeing now is broad-based inflation across a lot of different categories,” said Mark Hamstra, retail and financial editor at Supermarket News, based in New York.  But no one is expecting this rate of inflation to continue, and retailers are telling us that consumers have been accepting of moderate price increases.”

            Smaller retailers might not have much choice.  “We just have to pass it on and be true to our margin,” said Ron Leppert, grocery manager for Sundance Natural Foods in Eugene, Ore.  “It’s rather discouraging right now.  We’re absorbing the distributor gas surcharges, but not the higher product costs.” 

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