Nitheesh NH
FROM THE DESK OF DEBORAH WEINSWIG
Drought, War and Pestilence (or, the Outlook for US Food Prices) Even while inflationary trends in some categories are leveling off or even turning downward (apparel, for example), US food price rises have continued to strengthen. In May, food-at-home inflation climbed to 11.9% and we may not yet be at peak food-price inflation. The US Department of Agriculture (USDA) is projecting full-year consumer price inflation rates for food categories that are well above the year-to-date average, which suggests it sees no swift unwinding of recent eyewatering prices.Figure 1. US Consumer Prices in Food: YoY % Change (Actual and Projections) [caption id="attachment_151041" align="aligncenter" width="700"]
Source: BLS/USDA[/caption]
So, what are the key inputs that got us here and the prospects for those headwinds abating?
Wheat has a chain effect on the rest of the food industry. Consider poultry: chicken, for example, is a grain-fed animal, so the cost of raising a chicken is now higher, some of which has been passed along to consumers. Including imports, the USDA estimates a 12.5% decline in the supply of wheat in the US in the year ended May 31, 2022, and projects a 2.9% decline through May 2023.
Drought: The US produces its own wheat, and a drought in the Midwest, specifically Nebraska, Colorado, Kansas, Oklahoma and Texas, is taking a toll on domestic wheat production. The drought this year is a result of a weather pattern called La Niña, which occurs every few years.
In addition, in mid-June, thousands of cattle died across the Midwest US due to heatwave exposure.
War: We know that Ukraine is the breadbasket of Europe. Together, Russia and Ukraine account for 30% of global wheat exports, according to the Food and Agriculture Organization of the United Nations (UN). The protracted nature of the conflict in Ukraine bodes ill for a medium-term recovery in crop yields.
Pestilence: The cost of eggs has jumped dramatically, driven by avian flu. As of late June, the USDA reports that over 40 million birds in 36 US states have been affected by the outbreak. Avian flu has contributed to raised poultry prices, too.
The last input to consider is the price of gas. Diesel, specifically, which is used to fuel tractors, is sky high, feeding into the rise in crop production prices. While average gasoline prices have decreased sequentially for the latest three weeks, according to the US Energy Information Administration (EIA), and monthly retail prices are set to come down from a June peak, diesel prices have not yet followed this trend; the EIA records that weekly prices continue to increase for diesel.
The easing in gas prices will be welcome by consumers and industries—and any subsequent easing in diesel should have a knock-on effect on producer prices in farming and thus shop prices for food.
Figure 2. US Weekly Gasoline Prices, Regular All Formulations (USD per Gallon) [caption id="attachment_151042" align="aligncenter" width="700"]
Source: EIA[/caption]
US RETAIL AND TECH HEADLINES
Amazon Halts Opening of 16 Warehouses as E-Commerce Spending Slows (July 5) RetailTouchPoints.com- Amazon has postponed or canceled plans for openings of at least 16 US warehouses. This cutback comes after Amazon reported a $3.8 billion net loss in the first quarter of 2022.
- The loss was exacerbated by $6 billion in additional costs, including maintaining its massive fulfillment network and is also likely linked to lower overall US consumer spending.
- Warehouse club Costco has announced that from July 5, 2022, Costco gas purchases will require a Costco membership card. A basic Costco membership is $60 per year and includes access to gas stations that are part of its warehouse stores.
- The policy change was announced on signs at the pumps of Costco’s 15 gas stations in the state in June 2022. On June 28, state officials said that there are no consumer laws against Costco’s members-only policy.
- Eyewear retailer LensCrafters has opened a tech-focused flagship store in Palo Alto, California. It combines cutting-edge digital technology with an elegant design enhanced by vibrant and eye-catching finishes, according to the company.
- The new store has a dedicated display for first-generation Ray-Ban smart glasses, which were launched in collaboration with technology company Meta.
- Supermarket chain ShopRite has launched a USDA-funded incentive program called “Add Milk!” in select stores to increase access to milk and dairy products for low-income families.
- The Add Milk! campaign boosts the purchasing power of low-income milk-buying consumers—with Supplemental Nutrition Assistance Program (SNAP) dollars spent on milk and other dairy products by SNAP recipients. The USDA is assisting Baylor University's Collaborative on Hunger and Poverty in piloting the initiative.
- In partnership with the US Federal Government and UK-based baby milk products company Kendamil, Target is working to find new ways to improve the scarce domestic supply of baby formula.
- Target is accelerating supply from overseas vendors through the Operation Fly Formula initiative announced by President Joe Biden on June 1, 2022, wherein United Airlines will run free flights from London Heathrow Airport for the shipment of Kendamil infant formula to the US.
EUROPE RETAIL AND TECH HEADLINES
Ahold Delhaize Belgium To Install Cash Points Outside Select Stores (July 5) ESMMagazine.com- Netherlands-based grocery chain Ahold Delhaize has installed its first external cash point in the parking lot of its Sint Rochus location in Kortrijk, Belgium. Ahold Delhaize has partnered with Batopin, a Belgianoptimization initiative, to establish a network of bank-neutral vending machines to provide shoppers with access to cash.
- Batopin will install cash machines in the parking lots of 10 Ahold Delhaize stores as part of the partnership.
- British discount retailer B&M has appointed Mike Schmidt as Executive Director and CFO. Schmidt will succeed Alex Russo, who will be stepping up to B&M’s CEO position, as announced on May 31, 2022.
- Schmidt is currently Executive Director and CFO of UK-based furniture retailer DFS Furniture. He previously spent 13 years in corporate finance roles at leading investment banks including Citibank and UBS.
- Canadian apparel specialty retailer Lululemon Athletica has announced plans to expand its international footprint with the opening of two new stores and a local e-commerce website in Spain.
- The Spanish version of Lululemon’s e-commerce website, where apparel and accessories for men and women will be available for purchase, will go online in Spain in late July 2022 and two stores will follow in September, one on Calle Serrano in Madrid and the other on Paseo de Gracia in Barcelona.
- Netherlands-based hypermarket SPAR has opened a new INTERSPAR hypermarket spanning 3,000 square meters with an investment of €19.9 million ($20.4 million) outside of Zagreb, Croatia.
- According to the company, the store has been constructed with an emphasis on environmental responsibility and the integration of energy-saving technologies.
- UK-based multibrand online retailer Very Group has appointed former Walmart executive Lionel Desclée as its new CEO, effective September 2022.
- Desclée currently works as a Senior Advisor at consultancy firm McKinsey and previously served as President and CEO of Tom&Co, a European petcare retailer. He will succeed Henry Birch, who resigned as Very Group’s CEO after over four years of service.
ASIA RETAIL AND TECH HEADLINES
Atmos USA Partners with Anti-Fraud Provider Forter (July 5) RetailNews.asia.com- Foot Locker-owned Japanese shoe company Atmos USA has partnered with anti-fraud technology provider Forter. The company previously used a manual fraud prevention solution for authentication at checkout but found that this increased cart abandonment rates.
- Forter has enabled Atmos USA to completely automate its fraud prevention procedures, increasing lifetime value and customer experiences by removing friction.
- E-commerce marketplace platform eBay has announced a new collaboration with FedEx Express, a subsidiary of FedEx Corp. The collaboration will help eBay sellers in the Asia-Pacific (APAC) region sign up for a FedEx account and gain access to the full spectrum of FedEx e-commerce delivery service options at competitive rates.
- eBay sellers will be able to provide their consumers with a more upscale delivery experience backed by FedEx shipping solutions due to this agreement. The main advantages of the current strategic program are affordable prices, improved shipping capabilities and direct contact with FedEx, according to the company.
- Spanish fashion giant Inditex is set to remove three of its brands from China and halt online sales of Bershka, Pull&Bear and Stradivarius in the region.
- According to the company, the move is part of its ongoing efforts to modify its business strategy to focus its quality fashion offer on the unique and integrated experience of Massimo Dutti, Oysho, Zara and Zara Home shops and online.
- The J Shop, JD.com's fashion and leisure division, launched its first flagship location on July 2 in Chengdu, Southwest China. The store offers 2000 products from 400 different brands, including cosmetics, clothing, leisure, sports, luxury fashion and watches.
- The store has a variety of immersive experience zones with various themes, aimed at creating spaces for livestreaming and social media posts. The J Shop will offer on-demand delivery services for consumers living nearby.
- WeDoctor, China’s leading online healthcare platform, has secured over ¥1 billion ($150 million) from an undisclosed state-owned industry investment fund in eastern China's Shandong Province.
- The investment follows previous setbacks in its attempts to raise capital through a public share sale. The company is now reportedly looking to go public through a special purpose acquisition company (SPAC) listing.