How Inflation is Impacting the Food&Bev Industry

Last Week’s Moves

BLS Cash Index  629.54 (+0.07%)                 BLS Industrials Index 655.20 (-0.77%) 

BLS Foodstuffs Index 593.77 (+1.29%)         BLS Fats and Oils Index 861.20 (+0.44)   

BLS Livestock Index 709.03 (+0.38%)

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Welcome to your weekly food & beverage report, where we cover everything you’ll need to know for the week ahead. This week, we’ll dive into a market overview of the food and beverage industry based on consumer surveys and reports, explore what the data shows around the industry, and shine the spotlight on the beverage sector. Let’s dig in. 

Food prices are continuing to rise at extraordinary rates, shows the Bureau of Labor Statistics’ new CPI report 

The latest CPI report is out; inflation is truly running rampant, and the food and beverage industry is getting hit hard. In May alone, food prices climbed a further 1.2%, building on the 0.9% increase seen in April. This past month, all six major grocery store food group indexes rose, with five rising over 10%. The meats, poultry, fish and eggs index saw the biggest increase at 14.2%.

• Dining in?... Food at home prices have jumped 11.9% over the past year, the largest increase the index has seen since 1979. Over the past month, the index increased 1.4% coming in as the fifth consecutive month with an increase of at least 1%.
• Or carrying out?... Food away from home prices increased 7.4% over the past year, its largest yearly increase since 1981. Full service meals saw prices jump 9%, while limited service meals jumped 7.3%.

Reports and surveys from across various sectors of the food and beverage industry are in, and are highlighting pandemic fallout

Leveling out?... The Organic Trade Association’s annual industry survey’s results are in, and the statistics are suggesting a shift in consumer priorities. Organic food sales grew about 2% in 2021, valued at $57.5 billion. Compared to 2020’s 12.8% growth and 2019’s 4.6% growth, last year’s growth came up short. Breaking down specific categories in the organic segment, baby food saw the highest dollar sales growth over 2021 at 11%, trailed by beverages at 8%. Dairy and egg sales were stagnant, though remained nearly 11% higher than in 2019. 

• The not-so-new normal…The OTA is positioning last year’s slower sales growth as a correction back to what trends have looked like historically. As prices continue to climb, consumer loyalty to organic foods and beverages will be tested. 
• Still on the rise… Organic fruits and vegetable sales rose about 4.5% in 2021, reaching over $21 billion and accounting for 15% of the total segment. Organic meat sales, comprising poultry, livestock, and seafood, grew 2.5% in 2021 to reach a valuation of nearly $2 billion.
   

Beverage bonanza...IRI’s 2021 New Product Pacesetters report showed that eight of the top ten launches in the food and beverage industry last year were beverages. Though the beverages were all very different, young adult consumers seem to be the common denominator driving popularity. Leading the pack was Keurig Dr Pepper’s (KDP) Dr Pepper & Cream Soda with $137.3 million in sales, followed by Coca-Cola’s (KO) Aha sparkling water in second place with $128.6 million in sales. 

• Seltzer spin-off… Hard seltzers continued to see new offerings, including Constellation’s (STZ) Corona-branded hard seltzer line, E&J Gallo’s High Noon Sun Sips, Boston Beer’s (SAM) Truly Iced Tea, and Michelob Ultra’s Organic Seltzer (BUD). 
• Steady sales… Median dollar sales for 2021 food and beverage New Product Pacesetter launches was $20 million, coming in slightly lower than 2020 but just about equal to 2019 according to IRI data. 

Other stories…

• Summer forecast? Not so chili… Thanks to poor chili harvests this past spring, Huy Fong Foods (HUYA) is limited in its production of Sriracha hot sauce. The company warns of shortages in the coming weeks and months, saying there may be limited supply through summer.
• Cheers!… Sweden’s Buen Vato brand is launching a new cardboard tequila bottle made of 94% recycled material, and is hoping to spark an industry shift towards sustainability.
• Dynamic duo… Brown-Forman Corp (the owner of the Jack Daniel’s brand) (BF.B) has teamed up with Coca-Cola (KO) to release Jack and Coke RTD canned cocktails.

That’s all we have for you this week, do you have anything for us? We’d love to hear from you with stories or recommendations for new sections to include! Drop us a line at news@barchart.com with any feedback or input.