How Inflation Takes a Bite Out of Snacks

Fed Moves Create Some Pain

Inflation has left many Americans reeling. Home prices have shot up 20% in recent years, and tighter monetary policy is pushing mortgage rates higher, adding salt in the wound for would-be buyers. Making things worse, available inventory is still well below demand, which keeps house prices elevated.

The cost of groceries has been on a similar upward march and is now 10% higher than last year. Just getting to the grocery store is more expensive too, since the price of gas has skyrocketed in recent months, with the average cost per gallon now over $4.00.

Convenience Store Traffic Issues

It’s not just consumers struggling with higher gas prices. As people rethink driving, both convenience stores and the companies that supply their products, such as PepsiCo (PEP), General Mills (GIS), and Conagra (CAG), are facing a double threat. Fewer trips to the pump mean decreased patronage of these stores. Additionally, consumers with less cash to spend typically rethink that bag of chips or bottle of soda at the local convenience stores, threatening to erode profits even further.

Optimism Waivers

The robust labor market and rising wages indicate a strong US economy. Some economists also see signs that inflationary pressures are beginning to ease in the US. By contrast, Western European countries are also grappling with inflation, and they face more complex challenges due to their reliance on Russia for natural gas. Some predict a supply shock would knock Germany into a deep recession.

Still, for Americans who have been priced out of the housing market or are no longer able to afford their preferred brands, there are mixed feelings. The University of Michigan consumer confidence survey reported an improvement from March, when the number was at its lowest since 2011. Others feeling the squeeze of inflation are passing up that pack of gum while at the pump.

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