Food prices have been rising this year. In the first two months of 2014, the food-at-home (groceries) consumer price index (CPI) increased more than it did in all of 2013, reports the USDA. March food prices rose 0.4% as droughts in parts of the US and Brazil undermined agricultural output. Since 1990, grocery store prices have risen by 2.8% per year; this year, the food-at-home CPI is expected to increase by 2.5% to 3.5%. However, the ongoing drought in California could drive up this percentage even further.
As food manufacturing costs continue to rise, it is getting more expensive to do business in the CPG world. Consumers are still feeling squeezed as wages remain stagnant, and do not want to pay higher shelf prices for items they used to buy at a lower cost.
Manufacturers need to start taking costs out of their supply chains to deliver products at a lower landed cost to consumers. Smaller and mid-sized manufacturers are particularly hard-hit by this trend, as they may not have the resources to eliminate significant costs on their own. This is where collaboration can really make a difference. Partnering with other manufacturers and retailers shares costs between parties, rather than imposing the total cost burden on one company. Significant cost savings can be recognized from this model, which can make a big impact on mitigating rising manufacturing costs, making consumers very happy.
Want to see the full report from the USDA? Click here.