Food inflation stabilizes, but price changes remain a mixed bag

·Senior Reporter

12 June 2024 at 1:03 pm·3-min read

Americans continue to feel the effects of food inflation while companies try to win back weary shoppers amid higher prices.

In the month of May, the cost of food jumped 2.1% compared to a year ago, per the latest data from the Bureau of Labor Statistics. It's up 0.1% compared to April.

Prices for both food at home and food away from home are starting to stabilize.

Grocery prices were flat month over month in May and up 1% year over year. The cost to dine out jumped 0.4% month over month and 4% year over year. Both were in line with trends in recent months.

But when you head to your nearest Costco (COST) or Walmart (WMT), you may notice pricing changes are still a mixed bag.

Starting with breakfast, cost of cereal and cereal products dropped 0.9% from April, while fresh biscuits, rolls, and muffins went up 2.6%.

Consumers are starting to push back. General Mills (GIS) saw overall volume in North America drop 5% year over year in its latest quarterly results as prices jumped 4%. CEO Jeff Harmening defended on an earnings call that the company's pricing hasn't "gotten ahead of inflation."

Another cereal maker, WK Kellogg (KLG), saw prices increase 6.3% year over year in its latest quarter, but volume dropped 7%.

Miami Beach, Florida, Publix grocery store supermarket, breakfast cereal boxes, General Mills, Kix, Wheaties, Fiber One, Chex. (Photo by: Jeffrey Greenberg/Universal Images Group via Getty Images) — Publix grocery store supermarket in Miami Beach, Fla. (Jeffrey Greenberg/Universal Images Group via Getty Images) (Jeff Greenberg via Getty Images)

Meat prices continue to hit consumers' wallets. In May, poultry and uncooked ground beef rose 0.4% and 1.0% in price, respectively, compared to April.

Last quarter, Tyson Foods (TSN) reported prices for beef jumped 4.5% year over year, while pork was up 1.7% and chicken dropped 2.1%.

"In retail, we're seeing roughly 20% cumulative inflation over the last three years," Tyson CEO Donnie King said on an earnings call. Yet, the company saw volume in beef and pork increase, up 2.8% and 2.9%, respectively, while chicken volume declined 6.1%.

King told Yahoo Finance that consumers are getting choosy about what they're buying, with some lower-income households opting for private-label brands.

Pilgrim's Pride (PPC) saw its US consumers turn to chicken last quarter. CFO Fabio Sandri expects more shoppers to go for chicken breast over ground beef if the cost between the two continues to widen.

Miami Beach, Florida, Publix grocery store, Coca Cola, Sprite, soda bottles and 12 packs on shelf. (Photo by: Jeffrey Greenberg/Universal Images Group via Getty Images) — Publix grocery store in Miami Beach, Fla. (Jeffrey Greenberg/Universal Images Group via Getty Images) (Jeff Greenberg via Getty Images)

If you want a drink with your meal, carbonated drink prices dropped 2% last month.

Coca-Cola (KO) CEO James Quincey told Yahoo Finance that inflationary pressures are fizzing out.

"Our pricing levels and the input inflation cost levels are normalizing as we see through the year," he said. The beverage giant saw unit case volume growth of 1% year over year as prices increased 13% across its segments.

PepsiCo (PEP) saw net pricing jump 6.83% for its PepsiCo Beverages business in North America, while volumes dropped 5.59% in Q1.

As the cost of dining out continues to rise faster than groceries, many are pulling back on their fast food habits.

Chains like McDonald's are looking to break the narrative that it's too expensive to eat there. It's introducing a $5 value menu, while rivals KFC (YUM) and Burger King (QSR) have launched their own.

BTIG managing director Peter Saleh told Yahoo Finance that companies are investing in value perception to push back against the backlash from recent price increases. However, it'll likely hurt same-store sales and margin in the medium term.

"We think this is ... a necessary evil for these companies to be doing at this point in time, but it's going to take some time to change the perception and the narrative in the media that these companies are more about value than they are about price hikes."

Read more about May's CPI report and inflation:

—

Brooke DiPalma is a senior reporter for Yahoo Finance. Follow her on Twitter at @BrookeDiPalma or email her at bdipalma@yahoofinance.com.

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