The Community
Practical steps for small-business owners to manage inflation and expand
- August 1, 2022
KEY POINTS
Inflation is at a 40-year high, at 9%+
Consumers have less money to spend on products than ever before
Product costs have increased by over 10%+ across most food and beverage categories
Retailers need to stay agile, find new vendors and brands to drive foot traffic, and present customers with the best pricing
Growth Driven by Inflation
Retail dollar sales in the US improved last month, according to data from the National Retail Federation (NRF). Overall retail sales in June grew by 1% from May and were up by 8.4% year-over-year (YoY). Grocery and beverage stores also recorded a 0.4% growth in sales seasonally adjusted from May and were up by 7.5% unadjusted from last year. The increase was mainly due to rising costs, with consumer inflation at 9.1%, a four-decade high, meaning shoppers paid more but overall received less for their money.
As a result, inflation is causing consumers to modify their spending, prioritizing essentials like food, back-to-school items, and energy, with little to spend outside of necessary food and supplies and are looking for bargains.
Rising Product Costs
Food prices at grocery stores have increased by 12.2% over the last 12 months — the quickest pace since April 1979 — according to Consumer Price Index (CPI) data. Prices for cereals and baking products rose 2.1% in June, driven by a 5.3% increase in flour prices. Dairy prices were up 1.7%, while costs for fish and seafood increased 0.5%, and produce prices rose 0.7%. Contrarily, meat, poultry, fish, and eggs declined by 0.4% as beef, veal and pork became less expensive while ham and poultry prices rose. Across the board, the product sales remained the same, while revenue for products increased significantly, indicating higher cost per product customers pay.
Companies such as PepsiCo are expected to increase product costs and plan to keep shrinking the product sizes in a way to manage other expenses. Indicative of their early success, their flagship products such as Cheetos, Doritos, Quaker, Gatorade, Aquafina, and Lifewtr brands saw 10%+ growth.