Market Analysis

Fresh fruit led August inflation jumps in food and beverage, says IRI

Tue, 15 Nov 2022 07:25:59 GMT

The steady climb of inflation affected categories across the grocery store in August.

That’s according to global tech, analytics and data provider Information Resources Inc.'s recent report, “ August 22 Price Check: Tracking Retail Food and Beverage Inflation ,” tracking food inflation and its impact on consumer behavior.

According to the report, prices for food at home rose 1.6% from the end of July to the end of August, and 13.4% year over year through the week ending Aug. 28. Fresh fruit and carbonated beverage categories vied for the largest monthly price jump in August, each rising 5.3% compared to the end of July.

Food and beverage inflation has persisted, despite price moderation in other areas of the economy, such as gasoline. Overall retail food and beverage unit sales declined 4.5% compared to a year ago, and volume sales declined 4.0%, according to the report. What’s more, the IRI data shows that prices of consumer goods remain elevated across categories.

The upshot? Consumers are adapting and indulging more affordably on grocery items such as pasta, butter and frozen entrees. There’s also evidence in the report that suggests shoppers are increasingly trying out bargain-hunting strategies to stay on budget, such as planning additional grocery trips to cherry-pick specific items, ensuring the best price.

“We are beginning to see consumers scale back purchases, both in terms of units and volume in recent weeks, as retail food and beverage prices have continued to rise,” Krishnakumar Davey, president of thought leadership at IRI, said in a news release. “While retail food and beverage sales had been fairly resilient, we’re seeing signs of consumer stress, particularly among low-income households. Consumers are buying less in discretionary food and beverage categories, and are shopping more frequently in search of better prices. At the same time, consumers are willing to pay a premium for some categories — such as pasta, pasta sauce, butter and frozen entrées — which are considered affordable indulgences for more cash-strapped shoppers.”

U.S. digital grocery sales fell 1% in 2023, survey finds

Fri, 12 Jan 2024 14:10:31 GMT

The U.S. online grocery market finished 2023 with $95.8 billion in total sales, down 1.2% compared to 2022, according to the annualized results from the monthly Brick Meets Click and Mercatus Grocery Shopper Survey. A decline in order frequency by online grocery shoppers was the primary factor driving the lower sales in 2023, according to a news release.

“These annual results show that 2023 was very challenging for grocery retailing as higher prices chipped away at household purchasing power even though inflation has slowed considerably since its peak in 2022,” David Bishop, partner at Brick Meets Click, said in the release. “Despite the challenges, pickup continues to prove its appeal to shoppers, even without the benefits of expanded availability and aggressive promotions that aided delivery in 2023.”

Order frequency among monthly active users, or MAUs, contracted for the second year in a row in 2023. The average number of monthly online grocery orders completed fell 6% versus 2022 following a 4% decline in the previous year. Contributing to the year-over-year contraction was an increase in the share of MAUs who made only one eGrocery order per month, which rose over 300 basis points to 34% in 2023.

Average order value, not adjusted for price inflation, rose 3% in aggregate in 2023 versus the prior year. Each receiving method posted year-over-year increases: delivery AOV grew by 3%, pickup increased by 2.6% and ship-to-home rose 1.7% over 2022.

The overall MAU base, which includes all three receiving methods, climbed 2% compared to the previous year. However, there was a 172-bps increase in the share of MAUs who used one method exclusively, pickup, delivery or ship-to-home, to receive their online grocery order and 70% of MAUs fell into this single-method user category in 2023.

In terms of sales performance, the largest of the three segments, pickup, finished the year relatively steady versus 2022, growing its share of eGrocery sales by 56 basis points to 46% in 2023. Delivery, despite expanded availability due to increased competition among third-party marketplace providers, experienced a sales dip of 0.9% in 2023 versus the prior year but gained an additional 11 basis points of sales share ending the year with 37%. Ship-to-home continued its annual contraction as sales slipped 4.9% on a year-over-year basis, leading to a 66 basis points drop in sales share to 17%.

Across the U.S. eGrocery market, price-value formats like mass and hard discount experienced strong expansion in their respective MAU bases during 2023, in contrast, the supermarket format experienced a contraction. The average number of MAUs increased by 15% for mass and 12% for hard discount versus 2022, while the supermarket MAU base shrank by 4%. On average, 50% of MAUs engaged with mass in 2023, up 559 basis points compared with 2022, 5% of MAUs engaged with hard discount, up 42 basis points and 32% of MAUs engaged with supermarkets, down 194 basis points.

Due to these shifts in buying behaviors, mass expanded its share of overall eGrocery sales by 460 basis points in 2023 to 45% versus the prior year driven by the strong growth in its MAU base. Meanwhile, the supermarket format’s sales share contracted by 390 basis points to 29% due to declines in both its MAU base and order frequency.

Cross-shopping rates between grocery and mass formats continued to increase in 2023. The percentage of households who bought groceries online from both grocery, supermarket plus hard discount and mass during the same monthly period rose 150 basis points versus 2022. As a result, 30% of the grocery MAU base also shopped for groceries online with a mass retailer’s service during the same month in 2023.

The composite repeat intent rate for pickup and delivery services associated with grocery and mass formats slipped by 63 basis points to finish at 61% in 2023, and that downturn was due solely to declining repeat intent for grocery services, not mass. The share of MAUs who were extremely or very likely to use the same service again within the next 30 days climbed 48 basis points to 66% for mass while it fell 311 basis points to 54% for grocery.

“As Walmart grabs market share through its price leadership and omnichannel strategies, regional grocers find themselves in a precarious position. To remain competitive, they must intensify their efforts in improving customer engagement, offering tailored personalization, and building loyalty,” Mark Fairhurst, global chief growth officer for Mercatus, said in the release. “This strategic shift is not just about weathering the storm of price inflation and intense competition, but about thriving in it. By providing a shopping experience that is both seamless and highly personalized, grocery retailers can retain their existing customer base and gradually attract a wider audience.”

In terms of share of wallet, online’s share of total grocery spending in 2023 pulled back by 18 basis points versus the prior year to 12.5% based on the last week of spending in each month of the year across all retail formats. Excluding ship-to-home, as most supermarkets don’t offer this service, the combined pickup and delivery segments fared slightly better, falling just 6 basis points compared to 2022 and finishing the year with a 10.4% share of total grocery spending.

More information about December 2023 results is available at the Brick Meets Click eGrocery Dashboard or the Monthly State of the eGrocery Market Report page.

Orange Juice Stuck in Worst Rout in Five Decades as Demand Sinks

Fri, 13 Nov 2020 06:04:42 GMT

Orange-juice futures in New York are heading for a 15th straight day of losses, the worst rout in records back to 1967.

U.S. demand for the juice has been weakening for years. Add that to a declining citrus crop in Florida, the top domestic grower, and you’ve got a recipe for shrinking investor interest as fewer people want to use futures to hedge. Prices have slumped about 17 percent this month.

The liquidity drain has also sapped market swings: 60-day historical volatility for most-active futures is at the lowest since November 2014. Even though Florida’s harvest is forecast by the government to drop to the smallest in 73 years, surging imports of frozen concentrate juice from suppliers like Brazil and Mexico are making up for the losses.

Shrinking crop, demand deter orange-juice traders.

© Bloomberg

U.S. senator asks USDA to investigate grower price disparity

Tue, 15 Nov 2022 07:40:51 GMT

U.S. Senator Kirsten Gillibrand, D-N.Y., has asked the U.S. Department of Agriculture to investigate why the prices that produce growers receive have stayed stagnant or declined while prices for fresh produce from wholesalers and on retail shelves have increased.

At least three New York state growers said they’d like to know what Gillibrand, who’s on the Senate Agriculture Committee, finds out.

“My state of New York lost nearly 2,100 farms (6%) from 2012 to 2017, and nearly 11,000 acres were taken out of vegetable production,” Gillibrand wrote in a Sept. 24 letter to USDA Secretary Sonny Perdue. “A review of U.S. Bureau of Labor Statistics and National Agriculture Statistics Service data shows that prices paid to farmers for many important (New York) fresh market specialty crops — apples, snap beans, cabbage, and broccoli — have lagged behind the terminal market prices.”

A systemic review of the produce industry was last conducted nearly three decades ago, she wrote. Other types of farmers have benefitted from new tools and expanded market reporting that increased transparency and price discovery in the last 20 years.

“However, the specialty crop industry has lagged behind and an incomplete understanding of structural market forces and limited pricing data has created too much uncertainty for our growers,” Gillibrand wrote. “In short, produce farmers struggle to know if the price offered for their crops is fair and plan for the year ahead.”

The last three decades have seen changes in farming technologies, nutrition science, market structures and consumer behavior — but prices for farmers haven’t changed much, according to the senator.

The United Fresh Produce Association released a statement on the issue.

“The fresh produce industry operates on extremely tight margins, at every stage from grower to wholesaler to retailer,” according to United Fresh. “Our industry is the ultimate supply-and-demand economy, and our real goal must be to increase demand for fresh fruits and vegetables.”

Increasing consumption is key to raising prices paid to farmers, according to the United Fresh statement.

“Transparency in any supply chain is a good thing, and we always welcome USDA’s analysis of our markets,” according to the statement. “It’s important for each sector in our supply chain not to lose sight of our goal to grow fresh produce consumption, while fighting with one another over whose share of a dwindling pie is bigger.”

Ron Myruski, farm manager of Goshen, N.Y.-based Myruski Farms Inc. , said he’s watched prices on onions and other vegetables decline for years and is open to Gillibrand’s request for more investigation on the disparity.

But she’s forgetting a couple other factors, he said: Canadian competition and New York state’s high minimum wages compared to other states and countries. Myruski is also director of the Orange County Vegetable Improvement Association.

“I think one of the biggest factors in the Northeast and New York is Canada. It’s another country, and they shouldn’t be favored over domestic product,” Myruski said, citing the money exchange rate and different rules that enable Canadian growers to offer cheaper prices that are below the cost of production in New York. “I’m happy Gillibrand is trying to find the source of the problem, but it’s more than one source. Sometimes they have to look at themselves.”

Mark Rogowski, owner of nearby S.&S.O. Produce Farms in the black dirt region of New York, has also been affected by the stagnant or declining prices he gets for his onions and mixed vegetables at the terminal market and retail levels.

Besides competition from Canada, Rogowski said another factor is the three-month bidding process that large retailers have been doing the last five or six years.

“Retailers and terminal markets are getting good money on the product, but we’re not seeing it on our end, due to bidding and Canadian competition,” Rogowski said.

But even when taking those factors away, there’s more to it, he said.

“Gillibrand does have a point; there is still something going on. Why are we getting low prices on our end? Typically, we are always price takers, not price makers,” Rogowski said.

Dylan Dembeck of New Hampton, N.Y.-based Minkus Family Farms Inc., said he has a different perspective as a broker and packer as well as a grower.

“I do agree on the low prices, but I don’t necessarily think it’s for all the reasons mentioned or that the middleman or retailer is making it either,” Dembeck said.

The senator asked the USDA to undertake a comprehensive review of the produce industry at the farm, middle market and retail levels with a specific emphasis on the effects of:

Fewer buyers and brokers at the wholesale market level;
Increased concentration and consolidation in the food retail market;
Incomplete tools for timely produce price discovery;
Changes in consumer demand for new varietals and forms of processing;
Complex labor demand and uncertain agricultural visa policy;
Limited adoption of automating technologies for planting, weeding, pruning and harvesting;
Integration of packing operations into farm businesses;
Increasing number of market orders;
Expanded food safety and recall notification requirements;
Use of new technologies like online auctions by large, integrated retail chains; and
Increased production of organic specialty crops.

Russia-Ukraine Crisis Shakes U.S. Markets, Gas and Oil Prices Surge

Thu, 22 Sep 2022 02:56:19 GMT

A war of words between Russia and the Ukraine is now actual war and has significant ramifications on the rest of the world, including the U.S.

There are major implications for U.S. markets, Jim Wiesemeyer, Washington policy analyst for Farm Journal, told AgriTalk guest host Clinton Griffiths Thursday morning.

“As we speak, the Dow’s down 730 points,” Wiesemeyer says. “You saw crude, energy prices in Europe this morning went up a little over 40% in one day. Energy prices from an agriculture perspective across the board are up because of the significance of Russia and Ukraine in the corn and wheat export arena, and over 75% of sunflower oil trade is from that region. So, yes, we have major implications.”

Along with the Dow, the S&P 500 dropped 2.5% on Thursday morning, bringing it deeper into a market correction. The tech-heavy Nasdaq composite sank about 1.5%.

According to a Moneywatch report, oil prices jumped 7.5% on Thursday morning, topping more than $100 a barrel for the first time since 2014, on concerns that the crisis in Eastern Europe could disrupt Russian supplies of crude.

Russia accounts for about 12% of the world’s oil supply and provides about 40% of gas to the European Union. Most of that fuel is delivered through pipelines, including in Ukraine, according to Eurasia Group.

Wiesemeyer says the U.S. and its allies need to watch for whether Russian President Vladimir Putin shuts Ukraine’s ports.

“That looks like that’s what he wants to do, which will throttle Ukraine commercially but will boost agriculture markets,” he says.

Wiesemeyer says he is watching China closely to see its decision during an upcoming vote in the United Nations National Security Council. “If they vote in favor of Russia, that’s one thing. Most people expect that. But if China abstains from voting, that tells you that they’re a little more cautious on this development than most people think right now,” he says.

To counter Putin, Wiesemeyer says President Joe Biden and U.S. allies will have to go after the financial system in Russia, called SWIFT, as they develop more sanctions against Moscow for its action in Ukraine.

SWIFT is a Belgium-based messaging network widely used by banks to send and receive money transfer orders or information. The organization is overseen by central banks in the United States, Japan and Europe.

“Germany is not in favor of (going after SWIFT) at this particular time, so NATO is not in agreement,” Wiesemeyer says. “Plus, you have to go after Putin’s own money around the world along with his key oligarch officials.”

A Reuters article says data from the Bank of International Settlements (BIS) shows that European lenders hold the lion’s share of the nearly $30 billion in foreign banks’ exposure to Russia.

Wiesemeyer says to keep an eye on the price of international crude oil, sometimes referred to as Brent Crude, because that has implications globally.

“If it goes close to $120 a ton, history shows that will lead into a world recession,” he says. “We don’t need that… it will increase inflation even higher.”

Wiesemeyer adds that while the U.S. government says the country has inflation of 7.5%, that’s “laughable.”

“In agriculture, it’s in the double-digit arena already,” he says.

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