The high rate of inflation has become a major talking point over the last few months, with the prices of goods and services rising rapidly in major global economies.
The Grape Reporter spoke with two experts from the US and the UK to get their views on how this could impact table grape sales in two of the world’s biggest markets.
Inflation and the Omicron wave were the two key reasons listed by the International Monetary Fund on Tuesday when it sharply cut its global economic growth forecast for 2022.
Inflation in the U.S. continued to rise at rates unseen in decades, jumping to 7% in December compared to the same month last year – the seventh consecutive month in which inflation has topped 5%.
Meanwhile, inflation in the U.K. hit an annual 5.4%, its highest since March 1992 and up from 5.1% in November, itself a decade high. The figures are similar in the EU.
But what impact, if any, could sharply rising inflation have on table grape markets?
Joe Shaw Roberts, Consumer Insight Director of Produce at UK-based Kantar Group, says there are a few big trends brewing in the grape industry that could really take hold in 2022, such as gut health, sustainability, and the return to normal shopping behavior.
But he says the one that has the potential to hit shoppers hardest though is inflation.
“The last period of persistent high inflation and low consumer confidence we can look back on is the UK consumer response to the financial crisis nearly 15 years ago. Inflation prompts shoppers to seek small, in-the-moment savings when browsing supermarket fixtures,” Shaw Roberts said.
“Following the financial crisis, shoppers chose cheaper products, trading down from standard own label to economy tier. Brands responded to the pressure from economy tier by promoting more aggressively, giving shoppers another financial coping mechanism. Each accounted for £7 of every £15 that consumers saved in this ‘consumer recession’.”
“Other cost-cutting options for consumers were shopping in cheaper stores (which they did, but it only accounted for £1 out of every £15 saved) and buying less volume (which they didn’t – we all have to eat!).”
This time, he said, Kantar expects UK shoppers to manage spend by buying cheaper economy tier products. All other options are significantly less available to consumers than they were after the financial crisis, he said.
“We see some evidence of this in UK grape sales; economy tier grapes are up 4.5% (by volume, in 2021 year-on-year) but importantly for the industry, premium grapes are still highly sought after, growing at 11%,” he said.
Meanwhile, John Pandol, Special Projects Director of California-based grape company Pandol Bros., says there are many ways in which the industry could adapt to rising inflation.
“There are two prices the consumer sees: the known price per pound at the display and the surprise total price for the random weight bag at the register,” said Pandol.
“Grape prices should and must increase at all points along the supply chain. The average bag unit is 2.15lbs. Will the surprise price at the register of a $6 or $8 or $10 per bag reduce purchase? Will it be necessary to increase to 10 or 12 bags per 18lb carton to reduce the total price per bag?”
Reducing the size of a package to achieve the same retail price is called “shrinkflation” and is very visible in supermarkets, he said, adding that the most visible example is blueberries, where the price stays in the same range, but the clamshell may be 6oz, or a pint or an 18oz.
“Will consumers buy the same number of bags of grapes, at the same money, but less pounds? Will larger clamshells need to be reduced? How would this impact our ability to sell the total crop and overall consumption?” he said.