Food! What’s in Your Basket and How Much is Inflation Eating?

Struggle to Keep Up With Inflation

A pair of articles by the WSJ inspired this post and several new charts by me. 

Let’s kick off with Food Companies Are Having Trouble Keeping Up With Inflation

Packaged food makers can’t seem to raise prices fast enough.

The maker of Cheerios, Yoplait and Annie’s mac and cheese said organic sales, which strip out acquisitions, divestitures and currency movements, rose an impressive 5% from a year earlier. But that was entirely due to price increases, as underlying volumes were flat compared with a year earlier. Despite the price increases, rising costs caused a steep, four-percentage-point decline in gross margins to 32.5%.

The entire group of stocks has underperformed as a result. General Mills has actually been one the strongest, with its shares up 15% this year prior to Tuesday’s results. But that still trails the S&P 500’s gain of nearly 23%. Others haven’t fared as well— Campbell Soup is down around 11% this year and Kraft Heinz is up just 2%.

These Food Items Are Getting More Costly in 2022

Also consider These Food Items Are Getting More Costly in 2022

Everything from coffee to mustard is getting more expensive next year.  Many food manufacturers say they plan to raise prices in 2022 for a range of products from macaroni-and-cheese to snacks, the latest sign that consumers will continue to face higher costs at the supermarket. 

“There’s nothing immune from price increases,” said Tony Sarsam, chief executive officer of food retailer and distributor SpartanNash Co. adding that produce, dairy and packaged food such as bread and juice are among many items set to become more pricey next year.

Food prices are estimated to rise 5% in the first half of 2022, according to research firm IRI, though the level of increases will vary by grocers and regions.

Mondelez International Inc. said recently that it was raising prices across cookies, candy and other products sold in the U.S. by 6% to 7% starting in January. General Mills Inc.  and Campbell Soup Co. said their price increases also would take effect in January. Kraft Heinz Co. KHC  told retailer customers that it would raise prices across many of its products including Jell-O pudding and Grey Poupon mustard, with some items going up as much as 20%, according to a memo viewed by The Wall Street Journal.

2021 CPI Results Through November

• CPI: Up 6.8%
• CPI Excluding Food: Up 6.9%
• CPI Food: Up 6.1%
• CPI Food at Home: Up 6.4%
• Food and Beverage: Up 5.8%

Food Prices Expected to Rise 5% in the First Half of 2022 

More price hikes are penciled in for 2022. 

That is on top of price hikes was have already witnessed for 2021.  Much depends on what’s in your basket. This is how the BLS sees things.

CPI Seven Food Categories

Percent Change Year-Over-Year Seven Categories

• Meat, Poultry, Fish, Eggs: 12.8%
• Cereals, Bakery: 4.6%
• Dairy: 1.6% 
• Fruits and Vegetables: 4.0%
• Beverages: 5.3%
• Other Food at Home:  5.7%
• Food Away From Home: 5.8%

BLS CPI Basket 

The BLS weights Food as 13.995% of the CPI, with 7.333 percentage points for food at home and 6.262 percentage points for food away from home. 

Since much more food is consumed at home, eating out is expensive. 

Food at Home Weights 

• Cereals and Bakery: 0.979%
• Meat, Poultry, Fish, Eggs: 1.838%
• Dairy: 0.750%
• Fruits and Vegetables: 1.311%
• Other Food At Home: 1.935%
• Beverages: 0.920%

Question of the Day

Do your results come close to matching what the BLS says is happening?

Every Measure of Real Interest Rates Shows the Fed is Out of Control

In related discussion with a spotlight on housing, please see Every Measure of Real Interest Rates Shows the Fed is Out of Control

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