Whole Foods asks retailers to lower costs as inflation moderates
Higher energy, labor, and ingredient costs pushed many companies with a U.S. presence to increase prices in 2022. A new study by economists at the Federal Reserve Bank of Kansas City found some companies raised prices not only because their costs were higher, but because they anticipated future cost pressures.
The price increases were a major driver of inflation, which resulted in consumers cutting back on their purchases in 2022, “suggesting that they were hitting a ceiling on prices they were willing to pay,” according to Andrew Glover, a senior economist at the Federal Reserve Bank of Kansas City, one of the study’s authors.
IRI and NPD reported unit sales of food and beverages fell 3 percent in 2022 but the amount consumers spent on those items rose 10 percent. That showed consumers were willing to pay higher prices for groceries but bought fewer items, according to the Wall Street Journal.
In the first months of 2023, companies are facing lower costs as fuel prices have dropped and pandemic supply-chain snarls have eased. But Glover said that doesn’t mean the end of inflation or higher prices for end-consumers. China’s economic reopening following the elimination of its zero-Covid policy might boost global demand and the low U.S. unemployment rate – currently at 3.5 percent, a 53-year low – may result in sustained wage growth.
Inflation is coming down, from a high of 9.1 percent in June 2022 to 6.5 percent in December 2022, but U.S. Federal Reserve Chairman Jerome Powell said in January 2022 he’s worried U.S. consumers are now building inflation into their behavior.
“We welcome these better inflation reports,” Powell said. “But I think we’re realistic about the broader project.”
One retailer taking action on the issue is Whole Foods Market, which recently announced it wants its suppliers to cut prices as their own costs decline.
The Austin, Texas, U.S.A.-based grocer, which was bought by Amazon in 2017 and which operates 500 supermarkets in the United States, said at a virtual summit in December it wants to bring down retail prices on packaged groceries, according to The Wall Street Journal.
"We know our customers are weighing the impacts of inflationary pressure on their buying choices," Whole Foods Senior Vice President of Center Store Merchandising Alyssa Vescio said on the call.
To stimulate sales, Whole Foods executives said they are planning ...
Photo courtesy of Trong Nguyen/Shutterstock