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Food in Focus: Wholesale prices slow their increase in December 2019

Slowing wholesale price increases for fresh and dry vegetables and eggs for fresh use curbed the growth rate for producer food prices in December 2019, narrowing the spread with on-the-shelf prices.

The "final demand food" subindex of the producer price index, or PPI, rose 0.9% in December, a slower clip than November's 3.2%, according to the U.S. Bureau of Labor Statistics, or BLS. The subindex is a measure of prices that retailers pay food wholesalers to stock their shelves.

The "food at home" index of the consumer price index, or CPI, rose 0.7% over the same period. The subindex represents prices paid by consumers at retailers such as Walmart Inc. and The Kroger Co., according to BLS.

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Analysts use the difference between the two metrics to determine the state of grocers' profits margins, subtracting the growth rate of the PPI subindex from the growth rate of the CPI index. When the result is negative, grocers' margins are more likely to narrow.

In December, the difference was negative by 0.2 percentage points, narrower than the 2.2% for November, according to an analysis by S&P Global Market Intelligence.

Wholesale prices for fresh fruits and melons, fresh and dry vegetables, eggs for fresh use, shortening and cooking oils, as well as beef and veal, all fell during the month. Meanwhile, prices for pork, processed turkeys, dairy products, finfish and shellfish all rose. Consumer prices for fruits and vegetables fell 1.3%, while prices rose for all other products, with cereals and bakery products advancing 0.3%, meats, poultry, fish and eggs rising 2.3%, dairy and related products notching a 2.4% gain and nonalcoholic beverages and beverage materials increasing 1%.

Other food at home, a category that includes candy and margarine, rose 0.3%.

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Kroger debuted Emerge, a plant-based brand for burgers and ground meat, Jan. 8. The products are the latest in a series of plant-based meat products to be introduced by food companies and grocers.

Walmart unveiled a robot from startup Alert Innovation Inc. Jan. 8 that can pick grocery orders. The robot, called Alphabot, has been filling orders at Walmart's Salem, N.H., location, and the retailer said it will make decisions about a broader rollout of the technology after getting feedback from employees and customers.

The highest-value food deal of the month leading to Jan. 15 was Cott Corp.'s $787 million deal for filtered water provider Primo Water Corp. Cott, which has been considering alternatives for its coffee and tea business to focus on water, will assume the Primo name as part of the deal, which was announced Jan. 13.

Several major food companies found buyers for specific businesses. Conagra Brands Inc. sold its Lender's Bagels business to Bimbo Bakeries USA Inc., a subsidiary of Mexican bakery owner Grupo Bimbo SAB de CV, on Dec. 19. The companies did not disclose the terms of the deal.

Nestlé SA, meanwhile, said Dec. 19 that it would sell a majority stake of its Herta business to Spanish food company Casa Tarradellas SA for an undisclosed price. The deal, which creates a joint venture between Nestlé and Casa Tarradellas, includes cold cuts and dough.

Meat processor Tyson Foods Inc. sold California-based Golden Island Jerky Co. Inc. to Link Snacks Inc. for an undisclosed amount Dec. 30. Link makes Jack Link's beef jerky.

German conglomerate JAB Holding Co. SARL said Dec. 17 that it would combine Peet's Coffee & Tea Inc. and Jacobs Douwe Egberts BV and pursue an IPO for the new entity. Snack-maker Mondelez International Inc. is an investor in the coffee venture.

Coca-Cola Co. acquired all of milk beverage company fairlife LLC on Jan. 3 for an undisclosed amount. Coca Cola previously had a 42.5% stake in the Chicago-based business, and the soft drink giant said in a statement that the acquisition would give it more power in a growing product category.

"Value-added dairy products have been growing steadily in the United States, in contrast to the traditional fluid milk category, with great-tasting, nutrient-dense Fairlife milk products playing a significant role in that growth," the company said in a Jan. 3 statement.

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