A Niche Grocer in a Bind, Is Anyone Safe From Inflation?

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A Niche Grocer in a Bind, Is Anyone Safe From Inflation?

February 13th, 2023 Peter Frerichs Leave a comment

While the causes of inflation can be nuanced, the effects are clear. In the face of rising costs, most consumers either purchase less of something or seek cheaper alternatives. There are some examples of inelastic goods that remain in demand in the face of price hikes – prescription drugs, utilities, or tobacco products to name a few. But most products can either be swapped out or not consumed at all.

Whole Foods Market is one of the more expensive supermarket options. The Amazon-owned grocer caters to a segment that is accustomed to higher prices than one would find in more conventional markets. Yet, in the face of ever-rising prices, Whole Foods is making a push with their suppliers to bring down prices as lower-cost competitors such as Aldi Inc. and Trader Joe’s are beginning to gain market share.

Traffic to Whole Foods stores declined by roughly 8% in the fourth quarter of last year. Major rivals such as Albertsons and Kroger also suffered declines, but the previously mentioned Aldi and Trader Joe’s recorded increases. After the Amazon purchase of Whole Foods in 2017 the grocer has been introducing lower-cost Whole Foods brands as a strategy to reach a broader range of clients. This is beginning to bear fruit but the pandemic and resulting inflationary pressures are stubborn and unwieldy obstacles.

Food suppliers and restaurants have been raising their prices since the late first quarter of 2022. Kraft has raised their prices by nearly 14% since 2019, while Tyson’s beef prices increased by an average of 24% from January to April 2022. All of these hikes have predictable trickle-down effects on grocers and Whole Foods is now publicly leaning on its suppliers to help lower prices for the chain’s customers.

It is unclear how suppliers will respond. They are dealing with higher labor and production costs as well as transport (gas especially). Whole Food’s price hikes have been lower than the industry average but for many of its products, a cheaper alternative is readily available at competitor stores. Whole Foods is a lifestyle, yet once that lifestyle becomes difficult to manage, people seek out options.

Whole Foods faces pressures that are common across sectors. Inflation is just a “what if” until it actually appears and begins to slowly erode purchasing power. The US especially has a large segment of people in their 30s and 40s who never lived through the high prices of the 1970s. The only definite in life is history repeating itself … as it’s doing now once again.

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Global Food Supply Outlook – Remains Tight with US Drought and Ukraine

September 30th, 2022 Peter Frerichs Leave a comment

It’s been interminably dry for US farmers. Over the 2022 summer Great Plain states such as Oklahoma, Nebraska, and Kansas suffered some of the most intense heat in recent memory. This greatly compromised corn crops when they required water most post-pollination. Moreover, a significant percentage of corn crops were planted late after a very wet spring, adding to overall yield loss.

Disappointing US harvest figures coupled with the war in Ukraine is straining the global food supply situation. Recently senior executives from Bunge, Archer Daniels Midland, Bayer, and Corteva released a collective warning that the worldwide crop supply will be tight for some time. Roughly two years of bumper crops in North and South America would be needed to ameliorate the situation.

On September 12th the US Agriculture Department modulated its corn-production estimate by 3% from August (13.9 billion bushels). This figure sits nearly 8% below the 2021 total. In Nebraska, the Professional Farmers of America Inc., an agriculture advisory firm, slashed its corn yield outlook by 13%. North Dakota fared even worse with a 22% cut compared to 2021. The Chicago Board of Trade took notice reporting futures prices for corn soaring to 28% with wheat and soybeans following at 17% and 14% respectively.

When supply tightens, food or otherwise, poorer countries and consumers are hit the hardest. The USDA estimates that the number of food-insecure people is up 10% from last year. This puts the overall figure just north of 1 billion people. The invasion of Ukraine has only exacerbated the situation but crop prices have abated some thanks to a grain export Russia/Ukraine agreement in July. This has enabled one million-plus tons of grain to be freed from Ukrainian silos and exported through the Black Sea. Earlier this year it was estimated Ukraine was exporting only 40% of the grain it would typically ship, but thanks to the summer deal that number has risen to 60%. Barring any reversals, by the end of the year, Ukraine could be exporting up to 85% of what it normally would.

Much of this is dependent on Mr. Putin. Just weeks ago the Kremlin signaled they have been unhappy with the terms of the deal accusing the West of taking advantage of the exports as opposed to more wheat flowing to developing world markets. The threat alone boosted wheat prices after a period of decline. The deal will expire in late November. Global food security hinges on its extension as well as the freeing up of the storage necessary for the next cycle’s crop.

Archives, Global Trade Daily, Special Reports

Striving for Sustainability in Global Food Systems

June 21st, 2021 Margarita Lysenkova Leave a comment

As the global community gears up for the 2021 UN Food Systems Summit, it is significant that preparations are also underway by Global Reporting Initiative to deliver a new sector reporting standard for agriculture, aquaculture, and fishing. The Summit aims to leverage the power of food systems to deliver progress on the Sustainable Development Goals (SDGs). Yet, unlocking the contribution of companies in the food production sectors will be impossible without clarity on their sustainable development impacts.

As part of GRI’s Sector Program, which aims to deliver 40 Sector Standards over the coming years, the exposure draft version of the Sector Standard for Agriculture, Aquaculture, and Fishing is currently out for public comment. The Sector Program has a remit to provide the global best practice for transparency within sectors, helping organizations meet stakeholder expectations for comprehensive and comparable sustainability reporting.

We are prioritizing agriculture, aquaculture and fishing because these sectors provide for basic and essential societal needs: food, most obviously, but also raw materials, such as fibers and fuels. They also have shared and overlapping materiality, which steered our rationale for bringing them under one umbrella.

The Standard will add to the reporting landscape for the sectors, bridging the gap on sector topics where stakeholder expectations are evolving and scrutiny is increasing. It will deliver disclosures that consider biodiversity and natural resources, measures to mitigate climate change, as well as how to adapt farming and fishing practices in ways that minimize their negative impacts.

This focus closely dovetails with the objectives of the Food Systems Summit, for which the pre-summit activity starts in July. The UN articulates the aims as ensuring access to safe and nutritious food for all; shifting to sustainable consumption patterns; boosting nature-positive production; advancing equitable livelihoods; and building resilience to vulnerabilities, shocks, and stress.

Research and rationale

The draft Standard’s content is the culmination of more than 12 months of rigorous research by our Sector Team, drawing on authoritative sources and a multi-stakeholder process. A 19-member expert working group was instrumental in developing the exposure draft. Reflecting diverse backgrounds, it includes representatives from five continents and constituencies, with a unique combination of sectoral skills and organizational experience, including crop and animal production, aquaculture, and fishing.

The proposed Sector Standard will help companies increase recognition and understanding on their shared sustainability challenges. It includes relevant reporting topics that are covered by GRI’s (sector-agnostic) topic-Specific Standards – for example, climate adaptation, biodiversity, waste, food safety, and occupational health – as well as introducing seven new topics.

By including topics not covered by existing GRI Standards, we have expanded the breadth of reporting guidance for agriculture, aquaculture, and fishing organizations to identify their most significant impacts – thereby supporting decision-useful data that can be a catalyst for the adoption of more sustainable practices.

The seven new topics

The newly introduced topics in the draft Standard are:

1. Food security recognizes the sectors’ central role in food production, guiding organizations to describe commitments to ensure their operations contribute to the stability of food supply and access to food, including how they work with other organizations.

2. Land and resource rights calls on companies to report how they respect individuals’ and communities’ land rights (including those of indigenous people). It also asks about their operations and suppliers whose access or rights to natural resources cannot be assured.

3. Living income addresses whether companies provide enough for workers and producers supplying to them to afford a decent standard of living. The topic also deals with reporting on the proportion of employees paid above living wage.

4. Natural ecosystem conversion covers policies, commitments and monitoring tools to reduce or eliminate activities that change natural ecosystems to another use or profoundly change an ecosystem’s structure or function.

5. Soil health guides reporting on soil management plans and fertilizer application.

6. Pesticides use focuses on how organizations manage and use chemical or biological substances for controlling pests or regulating plant growth.

7. Animal health and welfare addresses the approach to animal health planning and use of welfare certification schemes or audits, as well as disclosing the use of any medicinal or hormone treatments.

Grounded in the SDGs

With positive and negative impacts that link to the SDGs, all of the topics covered in this Sector Standard, and the way it is structured, will make it easier for businesses to understand their contribution to the achievement of the SDGs – and how they can contribute towards solutions.

Perhaps more than any other sector, agriculture, aquaculture, and fishing organizations have wide-ranging impacts that touch on all of the 17 SDGs. In particular, this new Standard makes multiple linkages between topics and goals on ending poverty (Goal 1); ending hunger (Goal 2); ensuring the availability and sustainable management of water and sanitation (Goal 6); promoting decent work for all (Goal 8); reducing inequalities (Goal 10); ensuring sustainable consumption and production (Goal 12); taking climate action (Goal 13); protecting life below water (Goal 14) and life on land (Goal 15); ensuring peace and justice (Goal 16); and building partnerships (Goal 17).

We need your input

The global public comment period to gather feedback on the exposure draft for Agriculture, Aquaculture, and Fishing Sector Standard closes on 30 July. We encourage you to channel your considerations on this draft’s feasibility, completeness, and relevancy by completing an online questionnaire. The more input from all interested groups and stakeholders, the more we can do to ensure the delivery of a Standard that is fit-for-purpose.

Our hope for the final Standard, which we intend to launch in 2022, is to empower organizations to achieve meaningful and consistent sustainability reporting that supports sustainable food systems and encourages responsible fishing and farming practices. We all know that companies within these sectors are essential for providing the food and resources that human wellbeing depends on. Let’s ensure that they can do so in a way that contributes to lasting and sustainable solutions.

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ABOUT THE AUTHOR

Margarita Lysenkova joined GRI Standards Division in 2019 and has been instrumental in the development of the new Sector Program, contributing to the GRI Oil and Gas Sector Standard and leading the pilot project for the Sector Standard for Agriculture, Aquaculture, and Fishing.

With a professional background in corporate, UN and non-for-profit sectors across four countries, Margarita’s expertise spans international labour standards and sustainability. Previous roles include working for the International Labour Organization in Geneva, and in financial reporting with a Belgian multinational. Margarita holds degrees in economics (Saint Petersburg University of Economics & Finance) and business management (ESC Rennes School of Business).

ABOUT GRI

Global Reporting Initiative is the independent, international organization that helps businesses and other organizations take responsibility for their impacts, by providing the global common language to report those impacts – the GRI Standards.

A Niche Grocer in a Bind, Is Anyone Safe From Inflation?

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