While US food manufacturers and distributors have been facing huge cost increases, the impact on consumers will be moderate in 2006, according to a speaker at an industry seminar.
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Large food makers like Kraft, Hershey, Flower’s Foods and others have already announced price increases (most in the range of 3% to 5%) for many of the products they sell to retailers, as a result of the substantial double-digit packaging, fuel and energy costs faced by the manufacturers. However, the impact of the increases to consumers is expected to be a 2.5% to 3.5% increase in the Consumer Price Index (CPI) in 2006, according to USDA economist Ephraim Leibtag, speaking at The Food Institute’s outlook seminar Input Costs to Consumer Pricing, What’s Ahead in 2006?
Most of the increases are expected to hit consumers in the first half of 2006, noted Leibtag. If 2006 food inflation reaches the high end of the estimate, it will be just slightly higher than increases experienced in 2004, 2001 and 1996.
Looking back even further, food price inflation this decade is expected to be much more moderate than it was in the 1980s or 1970s.
Leibtag noted that the stabilising forces for consumer food prices are: better inventory management/cost saving technologies; globalised trade, leading to year-round availability; the increased competition from nontraditional retail formats; the upward trend of food-away-from home in the overall share of the food bill and an increased demand by consumers for convenience, quality, and low prices.
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