Rising inflation threatens to end nearly two decades of food price stability. Prices for staples like milk, beef, cocoa and sugar have retailers like McDonalds, Kellogg, and Kroger signaling that consumers may bear the brunt of these rising costs. Demand for meat in China and grain in India and emerging economies are key factors in rising costs and therefore prices. Grain prices have risen in particular because of drought in Russia, speculative trade, and overall planting difficulty. Furthermore, food prices are rising faster than the rate of inflation.
Now, it is up to food executives to determine the speed at which they pass costs off to consumers; many Americans still fear unemployment and are looking for any ways to save. In 2008, when producers had to push costs over to consumers, shoppers “switched to private label products”. Therefore, some companies like Weis Market have implemented a price freeze on over 1500 staple items. “There’s a ceiling people are willing to pay for a meal” Greg Horon Gibson, director of operation for Gibsons Bar and Steakhouse states plainly. Companies will indeed have to choose whether to raise prices at the costs of consumer loyalty or place price freezes to attract frugal consumers.
Wall Street Journal
No comments:
Post a Comment