Inflation’s Impact on Grocery Prices and How CPG Brands Can Adapt

Brandon Warren for The Barcode Group

Understanding the Impact of Inflation on Grocery Prices

In recent years, inflation has significantly affected the buying power of both businesses and consumers. Notably, inflation has had a major impact on grocery prices, affecting manufacturers of consumer packaged goods (CPGs).

Dealing with Inflation: A Challenge for CPG Brands

While retailers and consumers expect a decrease in rising prices, manufacturers of CPGs face the challenge of dealing with inflation’s impact on raw materials and supply chains. Brands can use the Price Pack Architecture (PPA) and supply chain agility to pivot away from price hikes in the face of inflationary pressures.

The Opportunities and Challenges in the Grocery Market

The team at The Barcode Group has gathered data on the impact of inflation on groceries to understand the current situation. According to the USDA’s data, grocery prices increased slightly below inflation, but food-away-from-home prices shot up, suggesting that cooking at home has become a more appealing alternative.

Effectively Managing Supply Chain Shocks

Supply chain disruption can occur for various reasons – inflation is just one of them. Brands must be prepared to handle these challenges, and a strategy for diversifying suppliers and having alternative product formulations can be key to managing supply chain shocks.

Import Volatility and Its Effect on Grocery Prices

For brands dealing with commodities not produced domestically, such as coffee, planning for sudden price changes due to inflation’s impact and other factors is essential. To prevent scaring consumers away with higher prices, brands can utilize Price Pack Architecture to redefine aspects of a product while maintaining the established price point.

Competing with Private Label Brands Amid Inflation

With inflation persisting, consumers may look to save money by moving to “private label” brands. To compete with these brands, national brands need to invest in innovation and brand equity to justify their price premium.

Find out more about the evolving cost of the grocery cart in this in-depth article produced by The Barcode Group.