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Chipotle Mexican Grill, Denny’s, and Shake Shack are among the restaurants raising menu prices; Domino’s Pizza and Darden Restaurants, which owns nine chains including Olive Garden and Longhorn Steakhouse, have shrunk the size of their discounts.
Burger King will offer consumers 3 percent less in discounts this year, the company has said.
Restaurant prices swelled 4.2 percent in June from a year earlier, the U.S. labor department reported.
General Mills is continuing to promote its grocery products, but offering smaller discounts; Danone SA is still discounting, but from its more profitable, higher-margin products. Other food processors are cutting back on store displays to save money.
The costs of labor, transport, processing and packaging, and food itself all are riding the wave of inflation engulfing the world’s economy, leaving companies with no choice, Jeff Harmening, General Mills CEO, told The Wall Street Journal.
“No one wants to increase prices, but we’ve had to and consumers understand,” he said.
Consumers put money into savings accounts at record rates last year and the jobs market has revived, he noted, leaving consumers with money to cover higher prices.
Snack giant Mondelez International, which owns 38 brands including Ritz crackers and Toblerone, has dropped 25 percent of its snacks’ flavors and sizes. Its Oreo brand now offers a two-cookie snack pack that costs a consumer less than the usual family package but has a higher profit margin for the company.
Supermarkets are unlikely to suffer from higher prices and fewer choices, according to Kroger CEO Rodney McMullen.
“We would expect to pass those cost increases to consumers,” he said to the WSJ.
If shoppers are unable to find or afford their usual choices, their alternative is cheaper house-brand substitutes, he said.
Some food makers have fallen back to the “shrinkflation” strategy, the WSJ noted, citing Tillamook, an Oregon creamery that reduced its ice cream containers from 56 ounces to 48 while keeping the price unchanged. (See “Food Companies Raise Retail Prices,” Trends Journal, 15 June 2021.)
Some restaurants are reducing portions rather than raising prices, a strategy consumers have shown a willingness to stomach, Hudson Riehle, a research executive with the National Restaurant Association, commented to the WSJ.
Instead of shrinking portions, some eateries have reduced the number of items on the menu, cutting costs and helping kitchens run more efficiently.
Menus in sit-down restaurants showed an average of 20 percent fewer items in this year’s first quarter than last, the WSJ noted.
TREND FORECAST: The casual comment that “consumers can handle higher prices” ignores the fact that millions of people are still jobless, behind on their rent, and face a hand-to-mouth future.
The longer inflation keeps pushing upward—5.4 percent in June, the more pressure on the U.S. Federal Reserve to raise interest rates. And as we forecast, the higher interest rates rise and faster and deeper the equity and housing markets will decline.
As we have noted before (“Food Companies Raise Retail Prices,” Trends Journal, 15 June 2021 and elsewhere), food inflation is hardest in developing nations, where food and fuel claim larger shares of people’s income than in the West. Thus, with these nations already deep in economic peril, the higher prices rise, the deeper the economies sink, the heavier the debt burdens grow… street protests against lack of basic living standards, government corruption, crime and violence will rapidly escalate.