Consumer Price Index reinforces trouble ahead

Wednesday's release of the September Consumer Price Index (CPI) numbers came more bad news - the more troubling number is the Food at Home report that showed an increase of 6.6% for the 12 months and a 0.6% increase over August.

2011 brought us higher food prices at unprecedented levels, crops and livestock destroyed by global weather catastrophes, nations at war over the lack of food supplies and more food recalls from unique points of origin. All of which has built a foundation for what may be one of the most exciting and game-changing years in the 2012 food world. 

With Wednesday's release of the September Consumer Price Index (CPI) numbers came more bad news. Food and Beverage expenditures in the CPI-U (CPI for all urban consumers) measured a 4.5% increase over 2011 September's numbers. But the more troubling number is the Food at Home report that showed an increase of 6.6% for the 12 months and a 0.6% increase over August.  

The CPI also reported a twelve-month increase for gasoline (all types) at a whopping 33.3% - clearly a factor in the rising food prices. The other categories of concern included Fats & Oils (up 11.3%) and Dairy and related products (up 10.2%) for the 12 month period.

Retailers must be concerned about the impact these increases will have on shoppers holiday planning. Expect to see smaller parties with less guests and perhaps even smaller portion sizes and assortments. Although difficult to manage, it may well be an opportunity to offer special discounts or group buying benefits to maintain customer counts and sales as these shoppers choose what retail outlets to frequent from Halloween through Super Bowl.

There is little doubt that in the coming years we will continue to see food prices rise based on environmental conditions as well as offsetting higher production costs. Many of the savings tactics most shoppers deployed in 2007 as the recession began are still being used each time they shop for groceries – using coupons, frequent shopper cards, shopping lists, shopping at non-traditional foods stores and even trading down their choices to less expensive brands are part of the regular routine. We also expect consumers to shave costs this holiday season by augmenting their recipes by decreasing the amount of the more expensive meats and seafood and adding more non-meat proteins that are filling and less expensive, including whole-wheat pasta, tofu, lentils, brown rice and vegetables to recipe. 

Besides making ends meet, perhaps these higher prices will even force Americans to finally slim down.