Retailers rationalize SKUs, rethink product mix and ecommerce approach as food inflation remains stubbornly high

Earlier this month, the US Bureau of Labor Statistics revealed​ food prices continue to climb, outpacing the overall Consumer Price Index, to reach a staggering high of 12.4% compared to last October. While the upward momentum may be slowing, it likely won’t stop any time soon based on the most recent Producer Price Index​, which showed wholesale food prices paid by manufacturers are up a whopping 10.4% year-over-year in October and 25.9% over pre-pandemic levels reported in February 2020.

Thanks in part to stimulus funds, which have since dried up, many consumers have continued to spend despite higher prices – but recent research suggests that may be changing with 84.51’s November Consumer Digest survey revealing 39% of shoppers are buying fewer groceries and 61% are cutting back on non-essentials like snacks and candy. Others are reducing how much they spend on staples like dairy, deli, produce and frozen food.

As consumers look for ways to save on their grocery bills they increasingly will be looking for deals and ways to save on everyday items, they likely will try new brands and retail banners – pushing industry players to make tough decisions about pricing, promotions, product assortment, and which services to offer and which services to discontinue as they struggle to balance consumer needs and basic business requirements.

In this episode of FoodNavigator-USA’s Soup-To-Nuts podcast​, Stefan Kalb, the co-founder and CEO of the AI predictive shopper and automated ordering service Shelf Engine​, argues the answer to all of these challenges, in most cases, is to simplify. He explains this means cutting back on SKUs and labor-intensive services and jobs to focus only on consumers need​ and are actually able and willing to buy. And while this approach may sound unsavory, he says it is unavoidable because the worst of inflation for food is yet to come.

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