by David Lester
Last week I got a letter from United Natural Foods Inc. (UNFI), the largest natural food distributor in the country. The first line read, “The cost of doing business is changing faster than ever for all of us.”
According to UNFI’s letter, food prices will rise starting in July. The two key components for these increases are fuel and ingredients. The price of diesel fuel is 30% higher than it was at this point a year ago. We have received periodic fuel surcharges from suppliers over the last year, but these new increases from UNFI will be somewhat more significant and affect over 14,500 items that they sell. Since we purchase a large percentage of our grocery items from UNFI, this will impact our store. Because of UNFI’s reach, this will also affect almost every co-op, Whole Foods, and other grocery stores across the country.
All food products that are shipped or produced with diesel fuel will see price increases in the very near future, if not already. Any products that are packaged with plastics or plastic film will see significant price increases because most of the plastics industry utilizes oil as a main ingredient.
Ingredients are also a factor. Dick Blackwell, VP Global Supply Chain at UNFI states, “Grain prices are up significantly and in some cases are nearly double what they were just last summer. Sugars, sweeteners, and proteins are all up as a result of diminishing supply and speculation.”
Even the world’s largest humanitarian agency fighting worldwide hunger, WFP (The World Food Programme), is concerned about global food prices just below their historic peak. The rise in global food prices ultimately hurts poor and developing countries the most and is a major concern to keep those in poverty fed and nourished. This problem is particularly troubling to me. It can be so easy to feel insulated from the growing concern to feed the world’s population when we live in such a lush and abundant part of the world. Also troubling is the growing percentage of income that poorer families in the U.S. have to spend on food. According to the U.S. Bureau of Labor and Statistics, a household with an annual income between $20-$30K spends about 18% of that income on food purchases. An annual household income between $100-$120K spends about 7.5%. Any significant increase in food prices will be felt hardest by the U.S. low-income families and food pantries will become even more needed than ever before.
I do believe, however, that our Co-op is well positioned and prepared to take on these impending price changes. Our Co-op dedicates an unusually high percentage of floor space to bulk products. We have one of largest bulk sections for a store our size and we even rival some of the larger stores in bigger cities. Less packaging equals lower prices for the consumer. Another benefit for shopping at your co-op is that 21% of our sales come from items that are grown or produced within 100 miles of Decorah. We know that our local farmers and producers will experience increases to produce their products as well, but the impact should be less. In general, these are people who are trying to limit their use of fossil fuels and the distances that their products are travelling are considerably less than a national supplier.
Each part of our store sets goal margins that we need to meet in order to operate your Co-op. Our members and customers can be assured that we will be paying close attention to our margins and be looking for ways to save you money at the register without compromising our Co-op’s core values. All the more reason for shopping local!