Major players in the food industry have strategically mitigated the escalation of prices, ultimately benefitting both consumers and transportation companies.

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According to two reputable freight brokers who spoke to a prominent freight news organization, truckers have been forced to implement route reorganization strategies to cater to grocers in the past year owing to a decrease in volumes.

However, it is noteworthy that these brokers have not encountered the ramifications of business decline that other firms have had to contend with.

Reactions from Logistics Companies

• According to Andrew Lynch, who holds the position of President at Zipline Logistics, the companies dealing in food products under his network have been experiencing a decline in the number of goods being transported. This drop is due to an uneven demand pattern where a shipper may require a dozen pallets one week and a full truckload the next. Nonetheless, Lynch has reported that his brokerage's overall volume has increased by 20% year over year.

• In contrast, David Spencer, the Vice President of Market Intelligence at Arrive Logistics, has observed that there has not been a significant reduction in the essential items' sales, such as groceries, by consumers. However, he has noticed that some of their key grocery customers are now opting for twice-weekly shipments, while a few years ago, these were limited to once a week.

• The quantity of packaging required for transporting food to restaurants or cafeterias is relatively less than that for grocery stores. During the initial months of the pandemic, the transition of consumer spending from dining out to grocery shopping proved to be a boon for the trucking industry.

• Industry experts estimate that a single truckload of food meant for a restaurant requires four to five truckloads when destined for a grocery store, owing to the extensive packaging. However, with consumers resuming their preference for dining out, the trucking companies are tasked with hauling relatively lesser amounts of packaging.

What Does the Latest 2023 Grocery Inflation Data Shows

FreightWaves' latest analysis of SONAR data has revealed that trucking companies are facing significant challenges in securing grocery loads. A closer examination of the refrigerated freight sector highlights the severity of the situation, with conditions reaching their lowest point since at least 2019 during the current spring period.

The Reefer Outbound Tender Reject Index indicates that trucking fleets are declining approximately 4.7% of refrigerated freight assignments, which is a considerable decrease from the 8% figure seen at the same time last year. However, the rejection rate for refrigerated trucking jobs has surged to a staggering 34.9% during the present period, indicating a highly competitive and challenging market.

Although the current index value remains relatively low, there have been indications of stability over the past six months. Notably, in mid-May, the Reefer Outbound Tender Reject Index experienced a significant decline, reaching approximately 2.6%. The current reading of nearly 5% represents a substantial advancement and positive trend in the market.

The stabilization observed in the consumer packaged goods market, such as soda, dish soap, cereal, and bread, could be attributed to a decline in inflation.

Recent Nielsen data indicates a 7% increase in food prices in May 2023 compared to the same period the previous year, coinciding with a 2% decrease in consumption. Industry experts predict that as inflation rates subside, consumer demand will experience a gradual revival.

Jennifer Bartashus, a senior equity research analyst of consumer staples and retail at Bloomberg Intelligence, opines that grocery volumes had plummeted to unprecedented lows, but with inflation on the decline, a reversal of this trend is expected, leading to a resurgence in grocery sales volume.

 The Phenomenon Known as "Excuseflation"

The phenomenon known as "excuseflation" has proven to be a boon for food manufacturers, yet remains a source of frustration for consumers. The trend, whereby companies cite external factors such as rising production costs or supply chain disruptions as justification for price increases, has allowed manufacturers to maintain their profit margins while passing the burden onto the end user. However, this practice has not gone unnoticed by consumers who are increasingly skeptical of such claims and demand greater transparency in pricing.

In recent months, there has been a notable shift in the discourse surrounding the escalating costs of goods and services. Isabella Weber, a respected academic at the University of Massachusetts Amherst, has conducted extensive research that points to inflation as a key factor driving up prices. Specifically, Weber has highlighted the widening profit margins enjoyed by businesses in the wake of inflation.

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Notably, the ongoing supply chain crisis, which has led to critical shortages of vital inputs such as semiconductors and container ship space, should have placed downward pressure on corporate profits. Yet, Weber's findings suggest that the opposite has occurred, revealing a complex and multifaceted picture of the current economic landscape.

In contrast, numerous sectors have recently announced staggering financial gains, with food processors leading the pack. According to a report by Time in April, conglomerates such as Cal-Maine Foods (which possesses Land O' Lakes and Eggland's), Kraft-Heinz, General Mills, and Conagra have experienced unprecedented surges in their net revenues over the past year.

In light of the challenging supply chain crisis, it may have been expected that companies should not have achieved such significant profits. Nevertheless, Bloomberg's Odd Lots podcast coined the term "excuseflation" to describe the trend of companies justifying unprecedented price increases with reference to the shortage of goods and supply chain difficulties.

 Numerous supply shortages have undergone mitigation or even reversal, with abundant freight transportation capacity across most modes. Nonetheless, businesses are not inclined to engage in cost-cutting measures, as they have discovered that consumers continue to purchase goods despite price increases from the previous year. In exchange for elevated prices, several companies have opted for lower volumes.

 In recent times, the trucking industry has experienced a rather disheartening trend whereby companies have chosen to prioritize higher prices at the expense of volumes. This development has not been particularly upbeat for the sector. Despite selling fewer products, Consumer Packaged Goods (CPG) behemoths have been able to report higher profits. However, it is becoming increasingly apparent that these firms will have to adopt a more judicious pricing approach and strive to augment sales volumes once more.

 Bartashus, an expert from Bloomberg Intelligence, has observed that the growth in grocery sales and margins was primarily attributable to inflation, while volume took a hit. As a result, publicly traded grocers are now in need of a boost in volume in order to sustain their profit growth.

 Regrettably, both consumers and truckers are met with little relief when it comes to the pricing of consumer packaged goods (CPG). However, Arun Sundaram, a seasoned senior equity research analyst at CFRA Research with expertise in big-box retail, has projected a decrease in prices as a result of promotional efforts, specifically on essential items such as cereal, produce, dairy, and protein.

Sundaram acknowledged that certain factors remain in play that could impede the reduction of food prices, such as the persistently high cost of select commodities like cocoa and sugar, as well as the increased cost of labor. Nonetheless, there have been some encouraging developments, including the decline of certain significant elements such as corn and transportation costs, which had previously spiked during the pandemic.

It is of Mutual Interest for Grocery Chains to Avoid Food Price Inflation and Increase Sales of Their in-house Branded Products

In March, UBS Chief Economist Paul Donovan opined on the likelihood of a "consumer rebellion" that could effectively curb grocery inflation. While the U.S. government has intervened in the past to prevent price hikes, such measures were not enacted this time around. Instead, Walmart emerged as an unexpected champion for consumers.

During its Q1 earnings call in May, Walmart revealed an alarming 20% increase in food prices over a two-year period, largely attributed to consumer packaged goods (CPGs) seeking to raise prices. To address this issue, Walmart has strategically promoted its private-label brands, which now constitute roughly 20% of total sales, with Sam's Club boasting a 30% share.

Private-label brands, once considered inferior products in the 1990s, have undergone a transformation and are now highly favored by consumers. No longer are they viewed as cheap knock-offs of popular brands, but rather as high-quality alternatives that offer exceptional value. As such, Walmart's private-label goods have

In contemporary times, store brands have become more astute in their approach, relying on their own in-house kitchens and branding experts to cultivate a private-label that is considered fashionable. Juli Herdegen Lassow, the proprietor of JHL Solutions, a private-label partnership firm, and former director of sourcing operations at Target, asserts that the goal is for private-label products to be the preferred choice among consumers, rather than simply being viewed as an economical option.

Lassow believes that private-label products will become increasingly innovative and enjoyable, such as high-end granola or delectable fruit snacks. This is due to grocers investing in food scientists and developing unique brand identities, in addition to crafting compelling flavor profiles that are sure to captivate consumers.

As per an analysis conducted by the industry group Private Label Manufacturers Association and data firm Circana, the first quarter of 2023 witnessed a significant surge of 10.3% in dollar expenditure on private-label brands across all grocery channels in the United States. In contrast, national brands experienced a comparatively modest growth rate of 5.6%.

Private-label Products Have Established a Permanent Presence in the Market

The promotion of private-label brands in grocery stores is not solely a means of providing cost savings to consumers. Rather, it is a lucrative strategy for these stores to increase their profits. As opposed to consumer packaged goods (CPG) firms whose profit margins range from 11% to 15%, grocery stores typically operate on profit margins of 2% to 5%.

This can be attributed to the limited options available for certain products, such as boxed macaroni and cheese. While there are only a few well-known brands available, there are various locations where consumers can purchase these products, including big-box stores, online retailers, and small businesses.

Therefore, if a grocery store were to develop a particularly appealing macaroni and cheese product, it would be a significant victory for them. As consumers are likely to purchase other items while in the store, the success of this private-label product would contribute to the store's overall profitability.

According to Christopher Durham, the esteemed President of Velocity Institute, a distinguished private-label professional association, the common perception of store brands pertains to everyday commodities such as milk or vegetable oil. Nonetheless, a pre-existing trend, set to persist, is the emergence of store-brand products that consumers genuinely appreciate.

Durham emphasizes that the key to success is to entice customers with a few unique items, thereby ensuring their return. The long-term implications of this strategy may translate into significant profits for grocers, experts predict.

In the context of the $875 billion trucking industry, private-label and freight authorities concur that the distinction between national and store brands is relatively negligible. However, the private-label sector deserves recognition for its role in sustaining freight volumes amidst the pandemic.

 Conclusion: The Future of Trucking Amidst Grocery Inflation

The future of trucking amidst grocery inflation poses both challenges and opportunities for trucking companies. On one hand, the rising cost of groceries can put pressure on trucking companies' profit margins. As grocery prices increase, transportation costs also rise, impacting the bottom line for these companies. This may lead to potential financial strain and operational challenges for smaller trucking businesses that rely heavily on transporting goods for grocery retailers.

On the other hand, there are opportunities for growth and adaptation within the trucking industry. As grocery prices continue to surge due to inflationary pressures, there is an increased demand for efficient logistics solutions that can help control costs throughout the supply chain. Trucking companies can leverage technology and innovative strategies to optimize routes, reduce fuel consumption, and improve overall efficiency in order to mitigate the impact of rising grocery prices.

In conclusion, while grocery inflation presents its own set of challenges to the trucking industry, it also provides opportunities for those willing to adapt and embrace change.

By employing strategic measures such as implementing advanced technologies and optimizing operations, trucking companies can navigate through these turbulent times and thrive in a changing market landscape. The key lies in staying agile, continuously innovating processes, and building strong partnerships with retailers to ensure sustainable growth amidst grocery inflation.

If you and your trucking company need further support with trucking compliance in line with the latest trends, feel free to reach out to us at Labworks USA. 

Our DOT Consortium's friendly team will be more than happy to discuss any concerns you may have and work with you to ensure you are always fully compliant, especially with random DOT drug and alcohol testing and pre-employment testing. Moreover, if you need help with FMCSA Clearinghouse registration, we can further support you.