Memorial Day is the unofficial kick-off of Summer and this year it brought significant travel delays and unseasonably warm temperatures for many. Memorial Day also brought one other thing. A reminder of higher Food prices and the decline of promotions. Memorial Day Food prices were nearly 10% higher than in 2021 as promotion frequency and depth continued to decline.
Continued Food Price Inflation
Everyday Food prices rose another 134 basis points in May/June continuing the pace of rapid price increases. Prices were led higher by Beverages, Frozen and Seafood where prices were more than 14% higher than previous year. The largest price increases were observed across the South and Southwest of the US.
Memorial Day Promotions
On Memorial Day 2022 shoppers paid 8.4% more than in 2021 for Groceries. Promotions have been declining throughout the year and Memorial Day was no exception. Memorial Day 2022 had 5% fewer promotions and 10% less promoted depth of discount vs. Memorial Day 2021. The Memorial Day promotion declines were seen in Frozen and Beverages which have historically been frequently promoted during Summer holidays. Categories like Water, Juice and Tea had 10-20% fewer promotions in 2022 vs. 2021.
Mass Channel retailers such as Target and Walmart won the Memorial Day price war as they improved their price position by +10%. High-low retailers that have typically relied on promotions are significantly higher priced as promotions continue to disappear. The historically most promotionally reliant retailers, which would sell as much as 40% of their items on promotion each week, have seen their price positions decline during key holiday weeks by as much as 30%.
As prices continue to rise retailers face the challenge of how to cope with margin pressures while still maintaining their Price Image. For many they have turned to a significant reduction in promotions. The Engage3 Price Image Management platform helps retailers simulate the impact of proposed price changes on margin, revenue and Price Image to determine:
- The optimal balance of everyday vs. promoted price changes
- The specific items where they should increase prices and the items where they should hold price
- The competitive response to rising costs to identify where they are over or under priced
- Items where they should pass through cost increases and items where they should only pass through a portion of the cost increases