Manufacturers move price hikes down to retailers.
From diapers to dog food, grocery prices in wide range of categories are on a five-year increase in prices, according to a new study.
The main culprit, according to Jacksonville-based consumer goods data analytics firm Acosta, in a report released in early February, is a spike in manufacturing and transportations costs. Nearly half of manufactures surveyed processed a price increase in 2018, the report found, with the average increase 7.8%.
That trend is expected to continue over the next two years, the report adds, where the challenges are acute and include: an 11% rise in aluminum prices; 60% rise in hardwood paper pulp; 21% rise in softwood paper pulp; 19% rise in diesel fuel; and 12% rise in gasoline. Also, increased demand for truck drivers due to “sheer amount of shipping product,” the report states, has led to driver shortages and higher line haul rates.
Of course, given the grocery business is notoriously high-volume, low-margin, pulling off price increases can be tricky, considering “shoppers have a wide range of options on what, where and how to buy,” the report, aptly named the Acosta Pricing Conundrum, states.
"At times, manufacturers are able to absorb, delay or minimize cost increases, but eventually it becomes necessary to negotiate price increases with retailers," Acosta Senior Vice President/Managing Director John Clevenger says in the statement. "Seventy-six percent of retailers have pushed back on or have been hesitant to accept price increases. However, we have found that increases are not necessarily a negative, as long as they are executed fairly and equitably across all channels of retail with full transparency."