Retail technology specialist CoolerX tracked the pricing trends of four popular snacks between January 2022 and March 2024 and found the overall cost rose by an average of 11.04%, even though inflation has come down from the heights seen in 2022 and 2023.
Given that 73% of Americans snack at least twice daily, the elevated costs are forcing shoppers to be more selective about their instore spending, which is having a substantial knock-on effect in other areas.
According to CoolerX, this shift in consumer behavior is fuelling price competition among brands and retailers, directly influencing marketing and promotion strategies.
“The surge in snack prices puts pressure on consumers, retailers and brands,” said Gayle deDie, SVP of Marketing at CoolerX.
“It compels retailers and brands not only to compete on price but also to align their marketing and instore promotions with consumer needs. They must thoughtfully engage consumers at precisely the right moment to more effectively address cost concerns, highlight product benefits and ensure a positive impact on both the shopper experience and perceived value.”
The pain of inflation
According to the US Bureau of Labor Statistics (BLS), the purchasing power of $1.00 in January 2022 has decreased by 11% over a two-year period, meaning consumers were shelling out $1.11 to buy the same treats in March 2024.
Good news for potato chip fans: The price of potato chips increased by 10.79%, with prices rising about 1.91% slower than the average inflation rate.
Chocolate chip cookies rose by approximately 11.04%, matching the overall inflation rate.
The price of yogurt punched in with the biggest increase of 14.72%, indicating that prices have risen 33.82% faster than the average inflation rate.
Ice cream clocked in the smallest increase of 7.64%: 30.55% slower than inflation.
Combined, the price of the four during the analyzed period rose by around $1.76 (the cost of goods available from a supermarket in an average US city).
The rising costs go beyond these four treats, with the UN Food and Agriculture Organization’s (FAO) Food Price Index slowly increasing since the beginning of the year, following declines over much of 2023.
For example, the price of orange juice concentrate in the US was 42% higher in April than it was a year ago, while the price of fresh orange juice in the UK has risen 25% over the last year.
In Greece, the price of olive oil rose by nearly 30% over 2023 and by more than 63% in April of this year.
But, why?
No single factor alone can explain the rising prices.
While inflationary pressures directly impact the price consumers pay for these treats, other issues like the ongoing disruptions in global supply chains, sudden policy changes, transportation delays, port congestion and labor shortages exacerbate these challenges. Climate change and adverse weather, too, play a role, with poor harvests and natural disasters leading to increased costs for ingredients like grains, nuts and oils.
That’s not even taking geopolitical factors into account – which have dramatically contributed to certain price fluctuations – or the ever moving pendulum of consumer behavior that has increased the need for more research and development to keep ahead of the market.
And then there’s ‘shrinkflation’ (or downsizing), which has cost the consumer around 10% more for certain goods between 2019 and 2023.
The Groundwork Collaborative define shrinkflation as the practice of decreasing the size or quantity of a product while keeping the price the same or higher.
The Groundwork Collaborative – a group of US economists – reported the phenomenon played a significant role in inflation between before the pandemic began and after most businesses had returned to normal.
For example, the Groundwork study reported snacks saw 9.8% of its inflation over that period being attributable to shrinkflation.
'Important pricing strategy'
“Shrinkflation is an important pricing strategy in companies toolkits because consumers are less sensitive to changes in size than changes in price. Thus, when a company is worried they may not be able to increase list prices any further without the fear of consumer blowback or a decline in sales, they may shift to shrinkflation,” said Lindsay Owens, executive director for Groundwork and author of the report.
“While shrinkflation is not new, it’s arguably the most deceptive pricing practice companies use and has come under renewed scrutiny as Americans face grocery prices 25% higher than prior to the pandemic,
“We find that as much as 10% of inflation in key product categories can be attributed to shrinkflation.”
Like CoolerX, the Groundwork study was based on BLS data, which tracks the pace of price increases across thousands of items each month to compile the Consumer Price Index (CPI). The BLS also traces any changes made by producers to their formulations or packaging versus the price.
The FAO’s most recent Food Outlook also provides the organization’s preliminary estimate for the global food import bill in 2024, forecast to rise by 2.5% to exceed $2 trillion. Those projections are driven by relatively favorable macroeconomic conditions, including steady global economic growth and lower food commodity prices.
That said, it still believes “global food production systems remain vulnerable to shocks stemming from extreme weather events, geopolitical tensions, policy changes and developments in other markets.”
