According to the US Bureau of Labor Statistics, inflation reached +8.3 % in April on a rolling annualized basis. Two main contributors to this increase are the cost of energy and the cost of food products. Since May 2021 and until April 2022, those have respectively surged by +30.3% and +9.4 %.
For the short to medium term, inflation is not going away. Continuous disruptions in the supply chains and labor shortages restricting the offer on one hand, pent-up demand for goods and services following the pandemic, abundance of liquidities in the wake of the stimulus programs buoying the demand on the other, are creating the conditions for a perfect storm.
Based on work published in January by French based market research and consulting firm Ipsos, 63% of all American consumers say their household budget cannot accommodate continued price increases and 80% expect to change their shopping habits. Increased prices will see some buy fewer things, but more will look to trade down to lower priced items (35%), look for products on promotion (42%) and of course turn to private label (26%). This translates concretely into shopping more at mass merchandise type retailers (e.g., Walmart, Target), being more discerning and assertive as of the perceived value of the products and less loyalty to brands. If pricing is well managed, this could be an opportunity for market share gains for distributors like manufacturers. The reverse is also true with possible drop in consumptions affecting durably certain class of retailers and brands. When combined with technological changes (e-commerce), these changes in consumption patterns can have a substantial impact on our day to day life. We may be soon shopping online globally for groceries with less choices locally. The trip to the supermarket may become the trip to the wholesaler and why not the producer? These are thoughts provoking ideas that I invite you to reflect on alongside your partners at the FACC.
Cédric Ballarin
