How Innovation—And Pressure From Amazon—Is Spurring Food Makers to Raise Prices
Food manufacturers are struggling with pressure from major grocery chains and rising supply chain costs, which are driving down margins. And now they’re turning to new and in some cases, non-traditional products to help them turn the tide.
Several household names—including Oreos maker Mondelez International, Hershey, and Kellogg, among others—are creating new products and selling them at higher per-unit costs to boost margins, The Wall Street Journal found in an investigation into food prices.
Mondelez, for instance, is selling its Oreo Thins Bites for 56 cents an ounce at Walmart, a better return than the 30 cents per ounce its charging for regular Oreo Thins. Kellogg has added Eggo waffles that are covered in imported vanilla that sell for 28 cents an ounce, according to the Journal. Its standard Eggos go for 23 cents an ounce.
The findings come as food makers struggle to drive revenue. Competition is fierce and retailers, including big-box stores and especially Amazon amzn , are pressuring them to keep prices down and improve upon their packaging. Meanwhile, costs continue to rise. The Journal report suggests food makers have been forced to find new ways to add ingredients or expand their product line to deliver higher-priced item with less of an uptick in cost.
Their attempts at drawing in more cash from fewer customers might be working. According to Nielsen data obtained by the Journal, dry-grocery sales volume was flat in November compared to the prior year. However, dry-grocery prices were up 2% year over year.
But perhaps nowhere is innovation and its effect on prices more apparent than in oat milk. This year’s hottest food item, oat milk has watched its prices soar due to widespread demand for the vegan, milk alternative. On Amazon, customers can buy a 12-pack of oat milk maker Oatly’s Barista Blend for $226. A six-pack regularly costs $25.