As the US experiences considerable inflation what can the produce and floral industries expect?

According to International Fresh Produce Association (IFPA) consumer research, retail profit margins in produce may decrease as almost half of consumers expect to adjust fruit and vegetable purchases due to inflation.

Flowers sales may begin to flatten as their prices and food prices increase since flowers are seen as more of a discretionary purchase.

The foodservice channel may have to wrestle with reduced customers at a time when they are recovering from the pandemic.

The January 2022 consumer price index which measures changes in the cost of food, housing, gasoline, utilities, etc. rose by 0.6% driving up annual inflation to 7.5%. This was the biggest gain since February 1982 and indicates less discretionary dollars for consumers.

Some of the drivers of costs increases are COVID related expenses in 2021 including testing, safety gear, extra cleaning, and higher salaries to frontline workers as well as transportation increases that include increased fuel costs and competition for trucks. Finally, labor and raw material shortages also drove cost increases.

According to CNBC, fuel oil surged 9.5% in January 2022 as part of a 46.5% year-over-year increase. Energy costs overall were up 0.9% for the month and 27% on the year. Food costs jumped 0.9% for the month and are up 7% over the past year.

The combination of higher food, housing and fuel prices indicates an acceleration in inflation during a time when labor market conditions are exceptionally tight. We can also expect interest rates to rise. This situation is unlikely to change any time soon.

According to Chain Store Age, retailers will have to adjust costs and sales forecasts for inflation to create their pricing strategies. This will have to be done with an eye to competition to ensure they are not pricing themselves out of the market. The good news is consumer behavior during inflationary times isn’t always based on price. It is often based on brand loyalty.

Join us for The Retail Conference June 9-10 in Schaumburg, IL, to connect with the full retail supply chain as you digest consumer and industry data and insights during the conference. Then maximize your networking at the golf tournament. Join your existing business partners and discover new ones!