A survey by Mazars found nearly 80% of companies (fewer than 100 employees) surveyed are passing, or have passed, their higher costs on to customers. Not a surprise to anyone that has visited the grocery store lately. The really interesting thing, however, is that this same report shows over 80% of the executives surveyed believe their sales will increase this year. So what’s up?
Why Higher F&B Prices?
The food industry costs are being driven up on several fronts:
- Higher costs to produce and ship goods
- Labor shortages – recruiting and employee retention
- Truck/driver availability
- Increased wages or salaries
- Supply chain bottlenecks
- Changing consumer tastes and currently…
- Russia’s invasion of Ukraine
“It’s almost become the new normal that you have to have a very scrappy and nimble business model to be able to survive in this kind of environment… It’s unprecedented.” Mark Schiller, CEO of Hain Celestial
A big concern for executives is how to pass costs to consumers without losing them. They simply can’t absorb consumer price index rises like 7.9% recently and food at home surging at an even faster rate of 8.6%. This is the biggest 12 month increase since April 1981. So, how are they achieving sales increases? It’s all about the right products for the right time.
Sales Increases? Change is in the air.
Mazars found just over half of food and beverage companies surveyed said new products are an important factor in growing sales in 2022, and 60% reported new product introductions are planned or already underway.
Health and wellness is leading the way as we have already seen. Per Mazars, 80% of respondents surveyed rated health and wellness a very important consideration.
The Covid pandemic has provided another catalyst for healthier items that were already growing in popularity before the outbreak occurred. It’s a big reason why CPGs are finding new ways to incorporate ingredients such as adaptogens, prebiotics and CBD into more of their products in 2022.
Also, cleaner and informative labels remain an attractive avenue for CPGs as shoppers keep a closer watch on what goes into their bodies. The International Food Information Council found nearly two out of three consumers say ingredients have at least a moderate influence on their food and beverage purchases.
Going against everything I know about doing business, I guess you really can deal with higher costs and have sales increases. Who would have thought.
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