(June 30, 11:30 a.m.) With food prices increasing at the highest rates in 30 years, retailers need to have a plan in place to take advantage of consumer price-consciousness.

Private-label programs, merchandising to emphasize value and take-home meal solutions are all part of that plan, said Jim Hertel, managing partner in retail consultant Willard Bishop Inc. LLC, Barrington, Ill., during the “Future of Food Retailing: Will Food Price Inflation Create Upheaval?” Web seminar conducted June 24 by The Food Institute, Elmway Park, N.J.

Hertel said he expects food inflation to continue at a higher rate than the 5% to 6% predicted by the U.S. Department of Agriculture.

“We think that inflation may be more like 7% to 11%, and it may be that way for two years or longer,” he said.

High fuel prices that began five or more years ago have finally reached a level where consumers are starting to change behaviors, he said. That favors retailers with strong private-label programs and strong emphasis on value.

Hertel said he sees consumers increasingly trading-down in their shopping behavior, which could be a boon for some stores.

“People are going to be going to restaurants less often,” he said. “They’re more likely to purchase at retail something they can heat and eat at home or prepare at home.”

Retailers with strong private-brand programs also can take advantage of consumer trade-downs, he said.

Research conducted using shopper-loyalty cards also indicated a change in behavior as consumer prices have gone up.

“The old idea of that getting the stock-up shopper may not be realistic any more because there just aren’t those shoppers,” Hertel said.

Fifty percent of shoppers studied never make a stock-up trip. Most shoppers visit a store two to eight times a month, spending $20-25 per trip.

Smaller-format, limited-assortment stores may have an edge for this kind of shopper, Hertel said.

Examples of those stores include Tesco’s Fresh & Easy Wal-Mart’s new Marketside banner, Von’s The Market, Whole Foods’ Market Express and Sprouts.

Retailers also should make sure their customers know where to find the bargains.

“They need to make sure they’re utilizing effective price communication and get full credit for the values they’re offering today,” he said.

Organics is one area that could suffer in these times of price jumps, Hertel said.

“I think that there are probably, and unfortunately, some shoppers who would prefer to purchase organic produce for example, who will be priced out,” he said. “The industry has struggled with its ability to supply sufficient product for retailers that want to stock 100% organic.”

In Willard Bishop’s latest report, “The Future of Food Retailing,” nontraditional grocery stores, such as wholesale clubs and supercenters, grew at a faster pace than traditional stores, but limited-assortment and fresh-format stores also showed promising growth.

“These formats … are posed for a lot of growth,” he said.

Food inflation changes retail marketing strategy
Jim Hertel, managing partner in retail consultant Willard Bishop Inc. LLC, says high fuel prices that began five or more years ago have finally reached a level where consumers are starting to change behavior.