Expected higher food prices could cause consumer caution in 2011

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Related tags: Food price inflation

Consumers are set to manage their food budgets more carefully in 2011 as they brace for higher food prices this year, according to a new report from the NPD Group.

Several major companies have announced price rises for selected product lines on the back of higher commodity prices in recent months. And although Americans are starting to return to restaurants as the economy improves, unemployment is still high, meaning that many consumers are still looking for good-value ways to cook at home. This will lead to continued interest in coupons and discounts, buying private label foods, and eating leftovers, according to the market researcher.

Chief industry analyst at NPD and author of Eating Patterns in America​ Harry Balzer said: “With food inflation accelerating in the last months of 2010 and government forecasts show it continuing into at least the first half of 2011, Americans will be making well-thought out choices this year on how they will feed themselves. It amounts to ‘relative food inflation.’ They have so much to spend on food and they will carefully pick-and-choose how they spend it.”

According to NPD research, 72 percent of meals are prepared at home. It estimates that the restaurant industry lost 2.4bn visits over the past two years from November 2008 to November 2010, from 61.5 billion visits to 59.1 billion visits.

Food deflation during this period helped to bolster supermarket business, but the US Department of Agriculture (USDA) has predicted that food prices will rise during 2011.

“Food prices so far are up less than two percent from the depressed year ago levels, when they were dropping by two percent,”​ Balzer said. “Supermarket prices are still below the levels of 2008. This is really a story about the upheaval created by the 2008 food price increases. We have yet to see how it will play out this time.”

The USDA said at the end of October that food price inflation – after dropping to its lowest rate in 18 years – will accelerate during the first half of 2011, leading to a forecast of two to three percent food price inflation during the year.

Related topics: Suppliers

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