Safeway Looks To Pass Along More Inflation To Consumers

April 28, 2014

The latest from The Food Institute.

We all hear reports about price inflation in the news all the time but inflation in food prices always garners more attention than most other areas, with the exception of gasoline and other fuel, according to Brian Todd, President of The Food Institute who points out:

So it was somewhat surprising to hear that one of the nation’s largest supermarket chains,  speak so bluntly about inflation recently when they released their quarterly sales. The chain’s President and CEO, Robert Edwards, commented, "While sales met plan in the first quarter, income was slightly below plan, in part as a result of inflation in produce, meat and pharmacy that was not fully passed along for competitive reasons. In the second quarter of 2014, identical-stores sales are currently running well above 2%, ….and we expect to pass along most of the inflation we are experiencing.“

Yes, retailers have to deal with inflation as well as consumers. Something that is not always obvious to shoppers and the media.  So let’s put that into a bit of perspective. 

At The Food Institute we have been tracking both types of inflation for over 50 years and comparing the two trends. Based on the most recent data from the government, The FI reported that while wholesale and retail prices both edged higher in March,  wholesale price advances outpaced those at retail – by slightly more than half a percentage point -- in February wholeslae outpaced retail inflation by more than a full percentage point. Even more importantly, this has occurred in 20 of the past 24 months. 

Obviously, those added costs at the wholesale level have been absorbed by the retailers, including Safeway.

But the Food Institute looked back even further, and found that over the past decade, wholesale price advances outpaced retail advance two thirds of the time, and retail food prices were greater than those at retail during 39 months. During a few months, price increases were exactly the same – the most recent being January of this year.

So what Safeway’s CEO is saying is really not that surprising when you look at the numbers. They, like numerous supermarket chains and independent operators across the nation have been absorbing at least a portion of the inflation they have been experiencing at the wholesale level and are finding it difficult to continue doing so.