Food price hikes and shrinkflation not as prevalent, says broker
Published: 13:31 25 Mar 2024 EDT
Analysts have found that food price increases have not been the major cause of rising costs for consumers, with shrinkflation not as prevalent as some suggest.
Jefferies, the US bank, analysed research which found that real-term spending on food and beverages grew by 33% from the fourth quarter in 2019 to the same period in 2023.
However, it noted that during this period the percentage food and beverage spending represents of total US personal consumption has remained steady at 8%.
Instead, the areas seeing the sharpest increases regarding personal consumption expenditure are costs for housing/utility, durable goods and healthcare – all of which have five times the increased spending compared to food and beverages.
Jefferies also found that 72% of the food categories it analysed were seeing volume growth increasing at a slower rate compared to the price per unit
“Volume growth ahead of unit growth over that period of time suggests that consumers have shifted to larger pack sizes, driving the price per unit up on average relative to the amount one is paying for volume purchased,” the US broker said.
“Put simply, consumers look to be compensating for higher prices by buying more value-based larger pack sizes, which sell usually at a lower price on the amount of volume/weight sold.”
Jefferies believes that as we near the end of current pricing cycles, companies may begin to implement shrinkflation tactics.
However, analysts at the broker say “that strategy has yet been fully enacted across all of food”.
