Anticipating higher food prices, supermarkets across the US are stocking up on food supplies. They’re getting ready for the continued increase in prices due to an ongoing supply chain crisis.
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Buying And Storing Supplies
Some supermarket chains admitted to buying, then keeping supplies to ensure they have enough stock even as demand continues to rise. In fact, grocery sales for the week ending June 19 registered a half percent increase from last year, but a 15% increase from 2019. This is according to Jefferies and Nielsen information.
As a result, supermarket stockpiles are driving shortages. The increased purchases of grocery chains are pressuring an already-strained food supply chain. Suppliers currently face higher transportation costs, labor shortages, and shortages of ingredients.
Reversal From Last Year
The situation where chains are doing the stockpiling is a reversal from last year. During the start of the pandemic last year, consumers emptied store shelves for fear of shortages. Now, retailers themselves are stockpiling to get items at lower costs to protect their margins.
David Smith, CEO of Associated Wholesale Grocers Inc. confirmed their plans on stockpiling. He said that they are now purchasing between 15 to 20% more inventory, especially items with long shelf lives. “We’re buying a lot of everything. Our inventories are up significantly over the same period last year,” AWGI is the wholesaler for more than 3,000 grocery stores. Buying more in bulk also helps the company get higher in-stock levels.
Increasing Inventory When Food Prices Start To Rise
Food sellers usually increase their purchase quantity when food prices start to rise. In the last few years, price changes remained modest and generally involved a circle of specific products. However, this year proved different, as price increases feature higher rates and cover more items than the usual.
Popular manufacturers such as General Mills, Campbell Soup, and JM Smucker are among those raising prices to offset higher costs. Meat and produce prices are also rising, and retailers are bracing for more increases until the end of the year.
Higher Prices For Food And More
Even as supermarkets pass along the increases to shoppers, they continue to buy groceries more than ever. Prices are also going higher for items such as used cars and airline tickets. So far, the increases have yet to translate to grocery prices. Many chains continue to keep prices low in order to compete with discount stores.
Despite assurances from the Federal Reserve that higher prices are transitory, few retailers believe that food prices will go down soon. A worker shortage is keeping labor and transportation expenses. At the same time, many companies had to offer higher salaries to maintain their workforce.
Feeding Frenzy
Tony Sarsam, CEO of Michigan-based SpartanNash Co, is also buying more and keeping more products in inventory. “When you have a uniquely inflationary period like now, it’s a feeding frenzy,” he said. The retail and distributing company is stockpiling about 20% to 25% more groceries. Sarsam said that more than 100 suppliers notified the company that they will raise prices soon.
However, stockpiling can also worsen shortages. While the supermarket industry managed to recover quickly from last year’s panic buying, they remain unsure about this year.
Some retailers already report that some items are running low. Many retailers say they’re receiving less than 80% of their orders from suppliers. “It runs the risk of making a bad situation worse,” said B&R Stores Inc president Mark Griffin. B&R is storing 10% more groceries including staples such as sugar, flour, and cereal. “If Walmart raises prices, so will we,” Mr. Griffin said.
Watch the 23 ABC News video reporting that food prices soar nationwide:
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