Eating is costing Americans more and more as the food industry faces the highest inflation in a decade. Large food manufacturers and restaurant chains are raising prices, cutting their own costs, and trying other strategies to offset the higher expenses. Between reducing grocery packages and decreasing discounts at restaurants, shoppers are paying more for their meals whether they notice it or not. Here’s how:

Higher price tags

General Mills Inc.,

Campbell Soup Co.

and JM Smucker Co.

are just a few of the food manufacturers raising wholesale prices, resulting in higher supermarket price tags for Goldfish crackers, Folgers coffee, and pet food over the summer and early fall, executives said. In restaurants, the Labor Department estimated prices were up 4.2% in June from a year earlier, with Chipotle Mexican Grill Inc.,

Denny’s Corp.

and Shake Shack Inc. among the highest paying channels this year.

Rising costs for ingredients, transportation, labor and packaging are straining businesses, said Jeff Harmening, General Mills chief executive. With consumer savings rates higher than ever and jobs plentiful, buyers can handle it, he said, “No one wants to raise prices, but we had to, and consumers understand.

Grocery stores have also been sensitive to price increases from food manufacturers. “We would expect to be able to pass these costs on to customers,” Kroger Co.

said chief executive Rodney McMullen. In the worst case, he said, higher costs for big brands will push shoppers to Kroger’s cheaper store brands, he said.

Conagra brands Inc.

Managing Director Sean Connolly said the company recently raised the prices of its Hunt’s canned tomatoes and Chef Boyardee products due to high steel prices and other costs. “It’s still very good value for money compared to other options,” like restaurants, he said.

Less discounts

Consumers may not notice it, but some industry players are avoiding raising prices by reducing discounts instead. Grain aisle giant General Mills is running promotions, but with smaller discounts for each. Danone yogurt maker HER

shifts discounts to more expensive, more profitable items. Other grocery stores are reducing additional displays in stores to reduce promotional expenses.

The promotions that forced diners to come to restaurants during the pandemic are also declining. Owner of Olive Garden Darden Restaurants Inc.

and Domino’s Pizza Inc.

are among the chains that no longer do as much discount. Carrols Restaurant Group Inc.,

the largest US owner of Burger King, expects its discounts to drop 3% this year, as that offsets rising costs.

Some chains promote more expensive items. Mcdonalds Body

The recent Chicken McNuggets meal linked to Korean pop group BTS cost around $ 7 and up. Burger King’s new Ch’King sandwich costs an average of between $ 3.99 and $ 4.99, compared to dollar cheeseburgers sold by the chain. “This is absolutely something that our system will be profitable with,” said Ellie Doty, director of marketing for Burger King.

Shrink-flation

Drawing:


Janne Iivonen

The manufacturer of oreo Mondelez International Inc.

and other food companies are turning to the price-pack architecture – changing packaging and sizes while charging more per ounce. The snack giant highlighted its two-pack Oreo, a new, smaller size that costs less but offers a higher profit margin for the business.

Tillamook, an Oregon dairy cooperative, has gone from 56 ounces to 48 ounce ice cream containers while maintaining the same price, in the face of higher costs.

More convenient packaging can also come at a higher price, like Kellogg Co.

new cereal snack-packs. Food business executives said it helps provide consumers with something new and interesting to justify charging more.

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Restaurants are also reducing portion sizes, a tactic some owners prefer to raising prices, said Hudson Riehle, senior vice president of the National Restaurant Association’s research and knowledge group. “History is clear that consumers are sensitive to this,” Mr. Riehle said.

It can be a risky decision if consumers understand and feel abandoned, said Andrew Pawling, COO of family food maker FoodStory Brands. The company, which makes Fresh Cravings chilled salsas and hummus, plans to switch to packaging materials that use less plastic resin, the prices of which have increased significantly this year. “We are looking for creative solutions to compensate for some of the pain,” Mr. Pawling said.

Less (variety) is more (profit)

At the height of the pandemic, U.S. food manufacturers reduced the number of unique items they sold by about 7% on average, according to NielsenIQ. The companies said they would not bring back much.

Simplifying restaurant menus has helped kitchens run more efficiently, save money on employee training and reduce waste, restaurant owners said. Technomic Inc. estimated that sit-down restaurant menus contained one-fifth fewer items in the first quarter of 2021 than a year earlier. Restaurant managers expect some of these cuts to be permanent.

“It got a little big and heavy for things that didn’t really matter,” Denny’s CEO John Miller said of the chain’s menu.

In supermarkets, Mondelez saved money by eliminating 25% of its snacks, ditching less popular packaging sizes and flavors. “This is a less is more situation,” said Glen Walter, Mondelez president for North America, which makes the company’s operations more efficient and allows Mondelez to fill the shelves. more expensive and more profitable snacks.

Business cost reductions

Drawing:


Janne Iivonen

Consumers are not the only ones paying for inflation. Food companies are also cutting costs through employee layoffs, reduced advertising, supplier reshuffles, and increased automation. General Mills recently announced a reorganization involving company staff cuts.

Large food manufacturers and restaurant chains are also using forward purchase contracts and hedging tools to keep costs down. PepsiCo Inc.

said it has helped him deal with inflation this year, although he is still considering raising prices after Labor Day.

“Our phone rang,” said Buck Jordan, Founder and CEO of Wavemaker Labs, a venture capital fund that has helped support the “Flippy” burger robot used in select restaurants in White Castle and beyond. chains. “All the big fast food chains are looking for solutions.

Many restaurants have built online ordering tools during the pandemic, freeing employees from taking orders. Chains like Applebee have equipped their servers with digital tablets to speed up in-person order taking, while Yelp Inc.

says demand is on the rise for electronic kiosks that allow diners to check-in.

The US inflation rate recently hit a 13-year high, sparking a debate over whether the country is entering a period of inflation similar to the 1970s. Jon Hilsenrath of the WSJ examines what consumers can expect next .

Write to Annie Gasparro at [email protected] and Heather Haddon at [email protected]

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