Snack Food Industry Remains Resilient as Inflation Hits Consumer Spending

Prime Planet, makers of all-natural Tostones snack chips, is closely monitoring the mixed impacts across all food sectors as inflation and the creeping cost of logistics hits consumer spending. What stands out most? Even with consumer food price inflation reaching over 10 percent (Q2) in the U.S., snacking remains sacrosanct for most consumers.

Apparently, when the chips are down, they just gotta have their chips!

“While shoppers are understandably frustrated these days by having to pay more for most every category of food, they are still willing to spend more on ‘affordable indulgences,’ such as snacks,” says Marie Gonzalez, Prime Planet’s Business Development Manager.

“This aligns with the trend that consumers increasingly prefer snacking over traditional meals, which in turn has created a heathy resilience to economic downturns in the snack-food segment,” she continued. “All good news for Prime Planet – and for our retailers and wholesalers who are eager to meet the demand for our high quality, better-or-you Tostones chips.”

Changes in Consumer Spending

Echoing this news is Lee Bridgett, an analyst with S&P Global Commodity Insights. In her recent Agribusiness Research & Analysis report, she states that “Consumers are changing their spending habits as prices continue to rise for food and other consumer goods… as inflation eats into household budgets.”

Bridgett reports that this is creating a “challenging landscape” for food manufacturers. “Companies are facing their own inflation challenges with higher input and operating costs,” she continues, “and cutbacks in consumer spending are limiting the ability for some companies to pass these costs on to consumers, hitting profit margins as a result.”

In this environment of operational cost increases – not the least of which are related to logistics slowdowns – some food manufacturers are even resorting to instituting “necessary evils,” like changes in quality, shrinking packaging, and boosting product pricing to make up the difference in diminishing profit margins. A sign of the times that at least one of our loyal Tostones customers has found to be rather unnerving (see account by guest blogger and loyal Tostones snacker Nick Daniels below).

“The ill-timed combination of a mercurial supply chain and now inflation are impacting all food sectors, no doubt,” emphasizes Gonzalez. “But we are firmly dedicated to maintaining our convenient pricing and high-quality product that customers have come to expect.”

Further Insights in S&P Report:

Walmart reduced its profit forecast as consumer shopping habits shift in response to inflation. They say customers are spending more on essentials such as food but forgoing discretionary spending items like electronics and clothing.

U.S. grocer Albertson’s noted that customers were switching from branded to cheaper private-label products, while at the same time continuing to buy premium options in certain categories.

Food companies such as Nestle’s are reckoning with higher operating costs with increased commodity, packaging, energy, and freight costs listed as contributing factors.

Coca-Cola also is reporting pressure on profit margins but is seeing strong revenues and sales volumes, suggesting that consumers are sticking with Coca-Cola brands even as they trim spending in other categories.

Confectionery company Mondelez International likewise is reporting strong financial results, on robust demand for its biscuit and chocolate brands, stating that, in the current environment, consumers see chocolate as an “affordable indulgence.”

* * * * * * * * * * * * * *

Finding Ways to Weather the Storm – with an “Inflation Drink” in Hand

BY Nick Daniels – Tostones fan and contributor to this week’s Prime Planet blog

I have a ritual. Every day, I pop into my local coffee shop and order an iced latte or what I’ve lovingly dubbed “the inflation drink.”

Now I know what you’re thinking: “inflation drink” sounds like something Willy Wonka rejected, some mad concoction that puffs you up like a balloon. But in reality, “inflation drink” is just my way of saying:  “Hi! Can I please have the smallest, cheapest iced latte?”

With all the price hikes, my days of ordering a large are over, and now, like everyone else, I’m cutting back. I find it’s a lot more fun than saying “small” and has the added benefit of making the point. That point, of course, is that times are tough, prices are skyrocketing, and consumers (like me) are making the necessary adjustments to get by. And it’s not just consumers: just about everyone in the food industry, from farmers to restaurants to supermarket, is searching for ways to weather the storm.

Take restaurants, for instance. Since raising prices only goes so far, some eateries have turned to “menu engineering” to emphasize certain items with a higher profit margin. A bigger font, or eye-catching box, can draw customers’ attention to cheaper dishes that help pad the bottom line. And if that doesn’t work? They slim the menu down. Not only does that reduce inventory costs, but it also helps with labor costs and a shortage of workers.

In a high inflation environment, companies (big and small) have an added incentive to put their whole supply chain under the microscope and ask the age-old question: how can we save a buck or two?

Monster Energy is a case in point. They recently announced plans to source their aluminum cans domestically after estimating that imported cans cost them $46 million in one quarter – thanks to air freight costs, labor, and the like.

Of course, even if a company manages to wring out every last inefficiency, sometimes it’s still not enough. And so, rather than raise prices, they might subtly shrink the size of a package. Sneaky? Sure. But then again, maybe the psychological victory of getting your favorite snack for the same price is worth more – even if you are getting “slightly” less.

At any rate, it’s certainly better than what I witnessed at the supermarket the other day. On my way out, I saw a young woman standing in the freezer aisle with two tubs of ice cream. She was about to go on her way when she glanced at the price. There was a moment of shock and horror, and then she ever-so-reluctantly put the ice cream back. It was heartbreaking. In fact, it reminded me of that old novelty song:

“I scream, you scream, we all scream for ice cream!” Except now we’re all screaming about the price.

Oh well, time for another Inflation drink.


About Prime Planet

An innovative international snack food company based in Miami, Prime Planet is committed to bringing to market a line of crunchy green-plantain Tostones snack chips that are all-natural, gluten free, non GMO, and kosher certified. Tostones not only come in the most delicious flavors – BBQ, lime, sweet chili, habanero, and original – but are an all-around healthier snack option, too.

Knowledge, expertise, and direct access to leading global distributors of wholesale snacks and bulk-food products allow Prime Planet to benefit from the shortest and most cost-efficient commercial routes for ideal product shipment and product placement.

For more information, or to become a distributor, visit www.primeplanet.net. You may also contact Business Development Manager Marie Gonzalez at 305-592-2044 or send an email to her at bdm@primefreshproducts.com. 


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