- Most food and beverage categories faced volume declines as prices rose by 13.4% in August compared to the same month a year ago, according to IRI. Frozen dinners saw volumes fall by 11.1% while prices increased by 20.7% compared to a year ago. Volumes of cookies in the center store declined by 8.9% as prices shot up 18%.
- Some categories — sports drinks, cold cereal, non-chocolate candy and salty snacks — proved more resistant to volume declines, even as prices rose. Energy drink volumes rose in August by 5%, despite a 4% increase in prices.
- Even though food inflation is continuing broadly, a few categories are demonstrating lower elasticity of demand among consumers.
Food prices continue to ratchet up. According to the U.S. Bureau of Labor Statistics’ Consumer Price Index for August, food-at-home prices have risen 13.5% over the past year, the largest 12-month increase since March 1979. This is as food manufacturers pass along higher costs for ingredients, packaging, labor and transportation.
While price increases have negatively affected demand across food and beverage, CPGs in some categories have been able to pass along costs with minimal impact on volumes. For example, while cold cereal prices rose 15.8% in August compared to a year ago, buoyed by higher grain prices, volumes slipped just 1.7%, according to IRI.
General Mills CEO Jeff Harmening said at the recent Barclay’s Global Consumer Staples Conference that the maker of Cheerios and Lucky Charms is benefiting from a return to eating at home.
“Even if consumers are decently well off now and unemployment is reasonably low, consumers are very nervous about what's coming in terms of the economic environment,” Harmening said. “And certainly, those consumers at the lower end of the economic period have already started to experience the challenge that inflation presents.”
Salty snacks is another category that has proven to have lower elasticity. According to IRI, category prices jumped 20.2% in August compared to a year ago, but volumes declined by only 1.9%.
Utz CEO Dylan Lissette said in a recent quarterly earnings call that price elasticities “continue to be better than our expectations.” The maker of potato chips, pretzels and other salty snacks also does not feel threatened by private-label brands because it believes people are not likely to trade down to less expensive brands.
“We do think that we are very recession-resistant as a category, salty snacks,” Lissette said. “We have very low private-label penetration... I think as people make their decisions around what they're going to buy, that is probably one of the least affected.”
The energy drinks category has been especially resilient amid price increases. Monster Beverage said in its most recent quarterly earnings call that the energy drink maker has been working to minimize higher costs where it can. For example, it has focused on sourcing aluminum cans from the U.S., according to CEO Rodney Sacks, and producing its beverages in closer proximity to consumers, reducing its reliance on long-distance freight.
Monster had a record-breaking second quarter, with net sales increasing 13.2% to hit $1.66 billion.