Food in Focus: December consumer prices rise slightly, wholesale stalls

U.S. retail food prices saw a slight bump in December 2020 as consumers continue to eat more at home due to the ongoing coronavirus pandemic. The rise in on-the-shelf prices, although not substantial, will likely give grocery stores' margins a boost.

The food at home component of the consumer price index, or CPI, which represents the prices that consumers pay for groceries at retailers, climbed 3.9% over the same month in 2019, according to data from the Bureau of Labor Statistics. The figure is slightly higher than 3.6% growth in November 2020.

At the same time, the final demand food portion of the producer price index, or PPI, which represents the wholesale prices that retailers pay to stock their shelves, was 1.2%, flat month over month.

Grocery analysts use the difference between the two metrics to gauge the state of grocers' profit margins. When the difference is positive, the grocers' margins are more likely to expand. In December 2020, the difference was positive by 2.7 percentage points, slightly higher than the 2.4% of the previous month, according to an analysis by S&P Global Market Intelligence.

Wholesale prices for oilseeds soared 31.1% but were offset by a 28.8% decline in the price of eggs for fresh use. Producer prices for grains also increased 14.4% while fresh and dry vegetables climbed 9.2%. Meanwhile, retail prices for meats, poultry, fish and eggs recorded an increase of 4.6% while consumer prices for dairy and related products and nonalcoholic beverages and beverage materials both jumped 4.4%. On-the-shelf prices for fruits and vegetable also rose 3.2%.

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The COVID-19 pandemic has proven to have altered how people consume their food, with those in the younger demographics becoming more inclined to cooking at home.

Conagra Brands Inc. CEO Sean Connolly, during a Jan. 7 earnings call with analysts, said the changes in the consumer behavior, particularly the rediscovery of cooking, have made the products in the company's portfolio such as food staples relevant to customers.

"And what's happening right now is cooking is in a very, very good place, not just because of the older generations who've always been more established in terms of cooking behavior, but the fact that these younger households have learned to kind of be comfortable in their own home, have explored their culinary and built their culinary skills out and are absolutely enamored with recipes and cooking right now," Connolly said.

Notable food deals during the month to Jan. 14 include Olam International Ltd.'s subsidiary Olam Food Ingredients' plan to acquire Illinois-based Mizkan America Inc.'s chile pepper business for about $108.5 million.

Hut Group Ltd. on Dec. 29, 2020, bought U.K.-based nutrition products supplier Claremont Ingredients Ltd. and beverage producer David Berryman Holdings Ltd. for a combined consideration of £59.5 million, payable in cash.

Additionally, Blu1877 Srl on Jan. 13 agreed to acquire a majority stake in Pasta Evangelists Ltd. from Pembroke VCT PLC for $54.5 million, while Swiss baked goods company Aryzta AG agreed to sell its remaining 4.64% stake in French specialty food business Picard to Lion Capital LLP and Invest Group Zouari for about $24 million.

On Jan. 11, potato chips producer Utz Brands Inc. announced it agreed to purchase snack food brand Vitner's and other related assets from Snak King Corp. for $25 million.