CORPORATE AMERICA’S NEW
with retailers and food service operators. The company declined to specify how much its freight costs increased in recent months, but a spokesman said they are up between 10 to 15 per cent for the total industry.
General Mills informed convenience store and food service customers of the price increases directly, a spokeswoman told Reuters in an emailed statement, declining to provide specifics. Chief Executive Officer Jeff Harmening cited logistic costs and wage inflation as factors.
“It feels to me like an environment that should be beneficial for some pricing,” he said in a presentation at last week’s Consumer Analyst Group of New York conference.
Hormel Foods, the maker of Skippy peanut butter and SPAM, has been talking with retailers about raising prices, according to Chief Executive Jim Snee.
“We don’t believe we’re going to recoup all of our freight cost increases for the balance of the year,” Snee told Reuters in an interview, noting operating margin sank to 13.2 per cent, from 15.6 per cent due to higher costs — including freight — in the most recent quarter.
Confectionary and snack company Mondelez International halted operations over a weekend late last in January at its Toledo, Ohio wheat flour mill — the second-largest flour mill in the United States — because the plant could not get enough rail cars to carry flour to bakeries, a spokeswoman said.
She declined to comment on whether Mondelez would raise prices to cover any higher costs.
A new government regulation for drivers and truck availability are pushing up freight costs at JM Smucker. “We anticipate inflationary pressures likely to cause upward price movements in a variety of categories,” Chief Financial Officer Mark Belgya said last week at an analyst conference.
To be sure, transportation costs are just a sliver of the price consumers pay at the grocery store. The US Department of Agriculture estimates transportation represents just 3.3 cents of every dollar consumers spend.
But an increase in truck rates over the next 12 months implies a 15-to-18 basis point gross margin headwind for US food companies on average, according to Bernstein analyst Alexia Howard.
“A lot of the consumer goods companies work on margin,” said Joe Glauber, a former USDA Chief Economist and a senior research fellow at the International Food Policy Research Institute. “They are going to be pushing those costs along ” to retailers. Ultimately “consumers end up shouldering more of the burden,” he said.
That would be a change for consumers who have seen years of low-to-negative food inflation, he noted.
Rising costs hit earnings
APrices of key commodity ingredients including corn, sugar and cocoa remain relatively low due