Why Promising Signs of Weaning Inflation May Not Apply to the Food and Beverage Industry

Last Week’s Moves

BLS Cash Index  590.60 (+1.29%)         BLS Industrials Index 611.44 (+0.89%)        

BLS Foodstuffs Index 561.32 (+1.86%) BLS Fats and Oils Index 826.09 (+0.42%)   

BLS Livestock Index 731.41 (+0.23%)

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Welcome to your weekly food & beverage report, where we cover everything you’ll need to know for the week ahead. This week, the BLS's CPI report offers mixed news for July, Nestle maintains its status as most valuable food and beverage brand, and Cargill breaks revenue records. Let’s dig in. 

The latest CPI report appears promising for inflation rates overall, but the story is different within the food & beverage industry

Across the US economy, inflation appears to be cooling; however, the food and beverage industry specifically appears to be the exception. The latest Bureau of Labor Statistics Consumer Price Index report showed that despite the overall rate of inflation dropping in July, food-at-home prices still managed to increase by 1.3%. The BLS tracks six major food categories for its report (cereals and bakery products; meats, poultry, fish, and eggs; dairy and related products; fruits and vegetables; nonalcoholic beverages and beverage materials; other food at home); all six categories saw price increases in July.  

• Break it down… Nonalcoholic beverages were up 2.3%, partially driven by rising coffee prices (which are up 3.5%.) Cereal and bakery products are 15% more expensive than last year, seeing a 1.8% increase in July alone.
• Certain variability… While there are some specific items that saw prices drop compared to last month, many analysts are saying that these monthly fluctuations aren’t indicative of the actual temperature of the market. Over the past year, food-at-home prices have jumped 13.1%, marking the largest 12-month increase since March of 1979. 
   

Major food & beverage companies are seeing record years for their annual revenue as well as brand value

We’re number one… According to “Food & Drink 2022,” a study by Brand Finance highlighting the 10 most valuable international food and beverage brands, Nestle SA (NSRGY) takes the cake. The report, which includes evaluation of 5,000 of the world’s largest food and beverage brands, ranks the included companies by value, brand strength, growth rate, and emergence; the report put Nestle at a value of $20.8 billion. 

• How do they do it?... Nestle attributes its agility in responding to changing consumer needs, customer demands, and supply chain challenges, to its decentralized structure. The company’s investments in digitization and long-term branding strategy also strengthened Nestle’s number one position.
• Runner up… Second place belongs to China-based dairy brand Yili Group, with the report valued at $10.6 billion, nearly half that of Nestle. Yili Group specializes in “high-status dairy products,” which have seen a boost over the past year as consumers’ perceptions of immunity boosting properties strengthened.

Revenue rocket… Cargill Inc. has announced their earnings for the year ending May 31, reporting annual revenues soaring 23% to a record $165 billion despite a fiscal year punctuated with ‘extreme events.’ Strong sales from international grain merchant companies helped Cargill’s bottom line, despite supply-chain woes, rising food inflation, and disruptions from the war in Ukraine. 

• Hardships schmardships… The Covid-19 pandemic, severe weather patterns, disruptions to trade and the Russian invasion of Ukraine have all hit the industry hard. In CEO David MacLennan and COO Brian Sikes’ letter to shareholders, the executives said they’re remaining optimistic that despite “ongoing disruptions in our industries and the world”; according to the letter, the 157-year-old firm “will continue to find new ways forward.”

Other stories…

• How sweet is too sweet?... On average, beverages today have 36% more non-nutritive sweeteners than they did in 2007. Packaged food sales saw a 9% increase in added sugars, according to research from Deakin University in Geelong.
• Getting this bread… Panera Brands Inc., composed of Panera Bread, Caribou Coffee, and Einstein Bros. Brands, has announced Konrad Meyer as its new CFO, effective late August.
• Coming to a close… Coca-Cola’s (KO) last installation of its Coca-Cola Creations drop of 2022 has been unveiled: Coca-Cola Dreamworld, which is intended to evoke creativity and imagination.
   

That’s all we have for you this week, do you have anything for us? We’d love to hear from you with stories or recommendations for new sections to include! Drop us a line at news@barchart.com with any feedback or input. 

More Food & Beverage News from Barchart

• Corn Heading Lower Out of the Weekend
• Soybeans Weaker on Sunday Overnight
• Wheat Lower on Monday Morning
• Wheat Mostly Lower on Friday