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What Supply Chain Challenges Mean for the Food and Beverage Industry

June 9th, 2022 (Updated 03/10/2023) | 4 min. read

By Pricefx

Rising food prices and shortages are affecting everyone in the chain, from farmers and ingredient manufacturers to consumers, but who eats the cost? In this article, we analyze the extreme ebb and flow of food price fluctuations of 2022, and provide strategies to brace for many more changes to come for the remainder of the year.

“The term we keep coming back to is the ‘ripple effect,’ with changes occurring now having a downstream impact on goods through the supply chain today and later this year,” said John Gilbo, food & beverage pricing expert at Pricefx. “Underlying cost increases individually and collectively will have a major influence on prices increasing in numerous sectors, such as wheat, dairy, and meat, to start. A solid food and beverage pricing strategy will include rules, alerts, and automation based on where you sit in the value chain.”

The most recent Consumer Price Index report from the U.S. Bureau of Labor Statistics says that food-at-home prices have risen 10% in the last 12 months, the largest 12-month increase since March 1981. Many factors to price hikes and shortages are to blame.



A U.S. factory shutdown has led to a formula shortage, the Russia-Ukraine war has worsened the fertilizer crunch, affecting crops across the world, and closed ports have prevented food from moving. China’s growing middle class is also now shaking up the market, with growing demand in the country, shifting the production and supply of meat. Global warming, droughts, new regulations for farmers, labor shortages and transportation issues also have a hand in how food is priced and available this year.

“Every aspect in the food manufacturing industry is fluctuating, such as raw materials shortages, changing government regulations, exchange rates with increases in export and import activity, and changing consumer nutritional tastes,” said Gilbo. “During times of uncertainty, many organizations are quick to cut prices without considering the long-term impact. Understanding outside market influences on your business and this data will help make informed decisions. These actions and investments will dictate the health of your business now, and in the future.”

Global economic instability is directly impacting pricing challenges in the food & beverage industry; consider these strategies before you set your next pricing:

Begin with data and intelligence.

Get a clear understanding of where money is leaking and exactly how much revenue is gained from every transaction. Watching the right data and intelligence allows you to avoid the hype and rely instead on what your customers are saying. The goal is to have a clear, holistic view of all your data, including internal data, with current and projected sales history and costs, and external data, with customer demand and channel partner data.

Track competitors to understand the market.

With certain operational segments seeing an increase in competition, the pressure to discount prices also increases. One of the best ways to track trends in the market is to understand what your competitors are doing, such as knowing their product offerings and pricing.

Don’t rush to drop prices.

A recent McKinsey study found a 1% increase in price, if demand stays consistent, increases operating profit by an average of 8.7%. The opposite also holds true. The right pricing strategies and tools can help you find weaknesses and opportunities specific to your business so you can make an informed price decision.

Test for full visibility before launch.

Test different market strategies to understand exactly how any small change will impact your bottom line. Once you’ve tested the best strategy for your overall goals and circumstances, you can confidently launch your pricing strategy.



This press release was originally published on BusinessWire: https://www.businesswire.com/news/home/20220608005377/en/Dough-and-Food-Prices-on-the-Rise-Pricefx-Expert-Shares-Pricing-Strategies-for-a-Looming-Recession


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