Get ready for higher prices at the grocery store. It's COVID-19's fault

Joe Taschler
Milwaukee Journal Sentinel

We're all about to pay more, at least for the next few weeks or months, at the grocery store.

Blame the coronavirus.

Unprecedented demand, the shutdown of food manufacturing facilities and a shift to more workers having to assemble orders for pickup and delivery – all caused by the coronavirus pandemic – add costs into the grocery business, and some of those costs will make their way to the checkout lane, industry watchers said.

As the virus infected thousands in Wisconsin and the nation, it changed the way we purchase and consume food. The grocery business may never be the same.

“It’s not going to revert back to (how it was in) January,” before the outbreak, said Rick Shea, president of Shea Food Consultants, a Minneapolis grocery and consumer packaged goods consulting firm. 

In addition to higher prices, look for an increase in automation, touchless checkout systems and more pickup and delivery options.

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Festival Foods employees Kayla Murray, left, and Teddy Rusch bring out carts full of customers' groceries to the dedicated Click N Go parking spot April 2 in Appleton. Rusch and Murray work at the 1200 W Northland Avenue location.

Adding costs to the business

When the lockdowns were put in place, products ranging from toilet paper to eggs to canned soup flew off store shelves.

Then, bars and restaurants shut down, or their business slowed to a trickle after they were constrained to carryout and delivery. People had no choice but to stay home and eat. That drove business at grocery stores to levels never before seen. 

Then, workers at meat packaging plants began getting the virus in droves. That temporarily shut down some operations. Limits had to be placed on how many meat items customers could purchase.

Distribution warehouse workers put in days – or even weeks – on end to meet demand.

Even now, manufacturers are running at full capacity, trying to keep up with demand for certain products. (Clorox said in May that its disinfectant wipes won't catch up with demand until summer.) 

Observers said manufacturers have reduced or eliminated incentives – demand is so high they don’t need to offer deals on anything – and, at least temporarily, that will lead to higher prices at the supermarket.

"We follow it closely, and we’ve noticed in certain categories, the amount of product on deal – or on some sort of discount – has dropped off in the last couple of weeks pretty dramatically," Shea said. "The consumer doesn’t notice as much because they are just glad to be able to get products.

"In the longer term, they will start to notice. You will start to see inflation creep into the food supply at the grocery market,” Shea said.

"My observation, and we watch this pretty closely, is that except for a few commodities – eggs being one of them – pricing has been pretty stable," said Ted Balistreri, one of the family co-owners of the Sendik's Food Markets chain in metro Milwaukee. 

"It’s still a supply-and-demand business, and I think what you’ll see from a lot of the big companies is they will be promoting their product less through discounting than they have in the past … until they can get their manufacturing back up to speed" and supplies better align with demand, Balistreri said.

For perishables, and meat in particular, "I think you are going to see a three- to four-week period where prices may go up a bit," he said.

"The supply chain has been challenged during the pandemic, increasing our costs of some products from manufacturers," said Brian Stenzel, senior director of community involvement for the Festival Foods chain of stores in Wisconsin. "As the supply chain stabilizes, we are hopeful that costs will return to previous levels, which will bring the price back down." 

There are other subtle shifts taking place, especially on the product side of the business. 

"One thing that will be interesting to watch is when some of the big manufacturers – think about toilet paper as an example – they have cut down since this pandemic on the number of items they are producing," Balistreri said. "They are just producing their bestsellers. Will they, in the end, reduce the number of items that they have been offering in the past?

"In other words, will there be (a situation where) there isn’t as big a selection for consumers as maybe they have been used to in the past?" he said.  "I don’t know...  but it is something that we are watching."

A woman places a 30-roll package of toilet paper from a large stack in her cart at Costco in Menomonee Falls, Wis.

Pickup and delivery are here to stay

As the pandemic and resulting stay-at-home orders took hold, the online ordering and pickup or delivery of groceries – a segment of the industry that was growing slowly – exploded.

Sendik's hired 125 people to handle the digital side of the business, Balistreri said.(The company intends to keep all of them, he said.) 

"We had been experiencing and projecting growth in both delivery and curbside pickup leading up to the pandemic," Balistreri said. The pandemic "accelerated that business dramatically."

Ordering groceries online will be a permanent and larger part of the business going forward.

"Our online ordering is up 400% since the onset of the pandemic, and the service has won many converts who will likely remain online customers," said Jim Hyland, vice president of public affairs for Kroger's Milwaukee-based Roundy's division. The division operates 106 Pick 'n Save and Metro Market stores throughout Wisconsin. 

The business has grown because a segment of the population particularly vulnerable to the virus had no choice but to shop from home.

"Obviously during this particular period of time, whether people wanted to or not, a number of people have tried" pickup and/or delivery, said Pat Fox, president of the Fox Bros. Piggly Wiggly chain of grocery stores in Milwaukee's far west and north suburbs. "I think you are going to see a certain amount of people who will stay with it."  

Pickup and delivery come with a cost to grocers. Where shoppers once did the picking and gathering of their bread, milk and bananas, employees are increasingly doing that in the online order and pickup or delivery models. 

“All these services cost money,” Shea said.

The pickup and delivery will never replace the brick-and-mortar store, grocers said, but it's crucial for them to offer every possible option for customers to make purchases.

"One of the things this has forced us to do is get better at the online business," Balistreri said. "And I think because of that, we will emerge from this stronger than we were pre-pandemic."

Buying a lot more in fewer trips

"Shopping patterns have drastically changed since the pandemic started," said Lauren Tulig, nutrition communication manager for Festival Foods. "Consumers are minimizing trips to the grocery store and shopping for weeks at a time."

The Fox Bros. stores have experienced the same thing.

"Our customer counts have dropped, but the purchases are up significantly," Fox said. "So people are not shopping as frequently as they were. Instead of coming to a store three or four times a week, they are only going to come once."

Going out to eat at home

The changes in the grocery business include a trend toward more cooking and eating at home.

"I think suddenly people are discovering the joy of having a meal at home and creating a meal, and I think there is going to be some kind of residual effect for us,” Fox said.

Much of that will depend on how eager – or reluctant – people are to dine out now that pandemic restrictions are being lifted.

The pattern has changed demand for certain products, including sudden runs on scratch cooking ingredients such as flour and spices.

"Grocers have become America’s preferred meal destination," Hyland said. "We are seeing more eating at home with the family, more meals being prepared from scratch, more baking and cooking as evidenced by flour being in short supply at times."

Comfort food is back in vogue

"At least up until this point in this pandemic, what we have seen customers gravitate toward is a lot of comfort food selections," Balistreri said. "They have the time to maybe create some meals that they didn’t have time to do before. We’ve seen a lot of purchases of rice and pasta and onions and roasts, stew meats." 

Festival is seeing the same thing.

"Consumers are stocking up on wholesome, less perishable items, like beans, rice, pasta, canned tuna and frozen fruits and vegetables," Tulig said. "They’re also more engaged in recipes and other cooking-related content."  

The trend looks to have some staying power.

"Eating at home is going to be the thing going forward," Shea said.

Where all of this ends up for the grocery business remains to be seen.

"There will be a new normal, it just hasn’t all been sorted out yet," Hyland said. 

Contact Joe Taschler at (414) 224-2554 or Follow him on Twitter at @JoeTaschler or Facebook at