Oct 15, 2021

By: Andy Harig, Vice President of Tax, Trade and Sustainability Policy and Doug Baker, Vice President, Industry Relations, FMI

Transitory, brief and fleeting are no longer adjectives that can be used to describe the current state of inflation affecting the economy. This news is reflected in recent statements by the Federal Reserve, as authorities indicate inflation will remain like a houseguest that overstays his or her welcome into 2022. Unfortunately, this means both shoppers and businesses will witness higher prices over a longer period, but the food industry remains committed to supporting grocery shoppers.

In a recent interview on CNBC, The GIANT Company President and CEO Nick Bertram noted the steps both his company and the broader supply chain are taking to mitigate higher prices, but acknowledged the challenges, saying, “The whole food industry is doing everything that they can right now just to get product and in a lot of cases that is creating more costs…” Bertram further offered Squawk Box anchors a seemingly extreme example of one manufacturer using a plane to obtain packaging material from another country due to delays at the border, which is an absurdly true scenario our companies know too well. Indeed, our members are problem-solvers; just this week, Walmart joined with UPS, FedEx and the White House to commit to both increased carrier capacity and 24/7 operations to support the holiday season.

The root causes of supply chain disruption include elevated consumer demand; global supply challenges; labor availability shortages; transportation and logistics pressures; higher fuel costs and difficulty in forecasting demand. Trading partners are trying to find balance and help absorb some of the costs where possible.

The current supply chain challenges are not unique to the grocery channel, as inflation has caused the price of all consumer goods – from corn chips to semiconductor chips – to increase. However, we recognize food is much more necessary and intimate than a mobile device, and consumers aren’t accustomed to high food costs since over the last 20-30 years, the U.S. has had consistent and low food price inflation.

Our industry must address new realities and new norms driven by prolonged uncertainty and volatility, especially as other supply chains like quick service and restaurants have not returned to capacity to help alleviate food-at-home demand. According to FMI U.S. Grocery Shopper Trends, average household spending has held steady at $143 per week, which is down from the $161 we witnessed at the height of the pandemic last year. For context, in 2019, the average weekly spending at the grocery store was $113.50. This was also a time when other supply chains, like restaurants and schools, were competing for that same share of the food dollar.

Our members continue to host open and honest dialog to identify and address the challenges trading partners have in common. For companies participating at the FMI Annual Business Conference, we’ve developed a joint business planning guide to support strategic executive exchanges. To help explain how food costs come to bear and communicate ways to save, FMI continues to tout its food prices educational experience in partnership with Cal Poly.

We don’t know what’s next during this turbulent time, which is why we need to rely on each other to help achieve the desired outcomes for our customers.