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Campbell Soup rode a surge in sales during the eat-at-home economic shutdown, but has seen sales slump 12 percent in this year’s first quarter, shrinking the company’s gross profit margin from 34.5 percent to 31.7 percent, as people returned to restaurants amid shortages of basic supplies.
Now the company has announced it will raise prices this summer to meet the growing costs of raw materials, shipping, and labor.
“We’re going to be very thoughtful” about how the company raises prices, CEO Mark Clouse said in a conference call with reporters, including the Wall Street Journal.
“The last thing we want to do is shut down the growth we’ve worked hard to have,” he said, but the first quarter “was made even tougher as these pressures were more significant than anticipated.”
Costs will continue to rise in the months ahead and squeeze margins even more, he predicted.
In May, the U.S. inflation rate reached 5 percent, its quickest pace in 13 years, the U.S. labor department said.
Although Campbell’s share price slid 6.5 percent on 9 June, the price remained up 1.6 percent on the year.
“We continue to be encouraged by the sustainment of cooking and eating at home, even as [shutdown] restrictions are lifted,” Clouse said.
General Mills, J.M. Smucker, and Unilever, the world’s biggest food purveyor, also have announced pending price increases, joining a broad array of consumer-goods companies such as Procter & Gamble that are jacking up prices, which we reported in “Inflation Ripples Through the U.S. Economy” in our 11 May issue this year.
The cost of cooking oils, corn, wheat, and other ingredients are being pushed higher by bad weather abroad that has damaged harvests, causing demand to rise for U.S. farm products, the Wall Street Journal reported.
Shipping costs have risen as much as 25 percent because of high demand and a shortage of truck drivers.
“We’re in a period of unprecedented commodity inflation,” Unilever CEO Alan Jope told investors on 7 June in comments quoted by the WSJ.
As a result, some Unilever brands will sell smaller amounts of packaged foods at the current price of larger volumes, he said – a strategy the industry calls “shrinkflation.”
Supermarkets’ cost of beef has shot up 20 to 40 percent, depending on the cut, Keith Milligan, controller of the Piggly Wiggly grocery chain, told the WSJ, adding that those increases will be passed to consumers.
“There’s no way we could absorb some of the costs,” he said.
Many food executives expect prices to continue to climb through the rest of this year, the WSJ reported, leading them to forecast additional price increases in coming months.
Chipotle Mexican Grill, Cracker Barrel Old Country Store, and Shake Shack are among restaurant chains that will, or already have, raised prices.
TREND FORECAST: As we have said before, food inflation will hit consumers especially hard in poorer nations where people are forced to spend a greater portion of their incomes to eat.
This, in turn, will push more people onto the streets to protest declining living standards, rising prices, government corruption, crime, and violence. As tensions rise and economies falter in developing and poorer nations, more people will seek refuge in safe-haven nations, which will escalate anti-immigration and nationalist movements in the countries they wish to seek refuge in.