Dive Brief:
- Increased production and decreased exports have led to a surplus of food and beverage categories, including milk, butter, cheese, eggs and frozen fruits and vegetables, Associated Press reported.
- This has led to lower prices for consumers while manufacturers attempt to cut costs to maintain margins.
- Another contributing factor is last year's bird flu outbreak, which slowed demand from importers. That demand has yet to return to previous levels for products like eggs, turkey and chicken.
Dive Insight:
Farmers may receive much of the attention when ingredient surpluses are in effect. But manufacturers must also adjust pricing, marketing and product development strategies.
If manufacturers are able to get a large amount of a surplus ingredient for a more cost-friendly rate, the company may decide to develop new products using those low-cost ingredients. That can boost margins and balance out other less cost-effective products while helping out the manufacturer's supplier and reducing the risk of food waste.
However, pricing may be one of the most fluid and volatile factors of any ingredient surplus. Manufacturers may be able to capitalize on lower-cost ingredients in the short term. But if other manufacturers using the same ingredients lower their prices to maintain rather than increase margins, they may become more competitive in the eyes of budget-conscious consumers.