American consumers are trying to stretch their dollars as inflation continues its chokehold on many goods, yet people aren’t ready to give up certain indulgences and convenience foods.
(Bloomberg) — American consumers are trying to stretch their dollars as inflation continues its chokehold on many goods, yet people aren’t ready to give up certain indulgences and convenience foods.
Prices have been stubbornly high for some foods like ice cream, along with frozen conveniences such as tater tots, trays of lasagna, breaded chicken and bags of tortellini, said SpartanNash Co. Chief Executive Officer Tony Sarsam. At the same time, shoppers are still stocking up on them because they’re easy to cook and prepare, he said.
“Those kinds of things are really growing, and they’ve had pretty big price increases,” Sarsam said during an interview at Bloomberg’s office in Chicago. “But they’re still growing because I think convenience is overwhelming the price piece of it.”
Sarsam attributed part of that popularity to the pandemic-driven boom of cooking at home, which has stuck around longer than he expected. While restaurants’ revenue has been growing, that’s largely due to higher menu prices, which are weighing on customers. US restaurant traffic was down in March, compared with increases in each of the prior two months, the latest data from Black Box Intelligence shows.
SpartanNash distributes to 2,100 grocery stores across the US and has about 145 of its own retail stores in the Midwest, under brands including Family Fare. During the most recent quarter, SpartanNash’s same-store sales and revenue both beat estimates on retail growth. The company’s grocery-store sales were driven by higher prices, while items purchased declined, largely matching the grocery industry.
‘Slow Conversion’
“It’s been a very slow conversion back from when there was a big spike of people eating at home versus eating at restaurants,” he said.
Consumers have been getting relief from surging food prices in certain categories. Eggs in March tumbled the most in 36 years, according to Labor Department data last week. The index for food at home also declined for the first time since September 2020.
Still, erratic weather and supply-chain gyrations are continuing to disrupt food supply lines and prices. Drought in the US has shrunk the cattle herd, sending livestock prices to a record and signaling higher costs for beef. Meanwhile, excessive rainfall in California stalled this year’s strawberry harvest.
Grand Rapids, Michigan-based SpartanNash has been seeking alternative strawberry suppliers to ensure it can meet demand due to the crop problems.
High Prices
Sarsam said shoppers shouldn’t expect lower prices for their grocery bills, especially on certain items like ice cream, bread and frozen potatoes. He said ice cream, in particular, hasn’t been responsive to market forces — even with butterfat costs coming down, ice cream prices aren’t. Yet volumes remain steady despite higher price tags.
“Ice cream is one of the items that has had pretty strong growth,” he said. “That’s maybe one of those items that is a nice indulgence for people who are trying to find ways to enjoy life when times can be tough.”
The grocery company’s supply chain is improving but isn’t back to pre-pandemic efficiency. Sarsam said about 75% of orders are delivered on time and in full, compared with 90% before Covid-19 struck the US. About a year ago, just half of SpartanNash’s orders were timely and complete.
“We’re not all the way out of the woods yet,” he said.
SpartanNash shares rose less than 1% to $24.69 at 2:57 p.m. in New York. The stock was down 19% this year through Tuesday, compared with an 8.2% rise for the S&P 500 index.
More stories like this are available on bloomberg.com
©2023 Bloomberg L.P.