Grocery Tracker: Food Deflation

Costco stock saw major movement this week, rising over 3 percent from Wednesday’s (Feb. 1) close to $166.82 at the start of Thursday’s trading. The latest boost means Costco is out of the valley, for now, seeing prices comparable to those in Aug. 2016 before prices fell September through November. Friday morning trading saw Costco’s value down 0.11 percent from the previous day’s close of $168.15, though still well up from past numbers.

Kroger was up for the week as well, seeing value rise from a $33.24 market open on Monday to a value at the time of writing at $34.07, down 0.09 percent from Thursday’s close but higher overall. Grocery conglomerate Ahold Delhaize saw little net movement from the start of the week, with prices at the time of writing at €20.02 — comparable to the week prior.

Whole Foods continues its downward trend seen since the tail end of December. At the time of writing, Whole Foods was trading at $29.64 per share, down 0.07 percent from the previous day’s close and down a full 2 percent from the previous week. All told, Whole Foods’ value has dropped over 8 percent since Dec. 21 of last year.

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A whole host of environmental factors contribute to changing food prices — weather patterns, natural disasters, disease outbreaks, etc. Global economic factors also come into play, such as the price of oil, transportation costs and the value of the U.S. dollar compared to foreign currencies. Recently, these factors haven’t exactly been working toward a food price increase.

Quite the opposite, in fact, as according to USDA data, retail prices for major food sources ended 2016 on a downswing. Looking at specific retail food categories, prices declined 21.1 percent for eggs, 6.3 percent for beef and veal, 4.1 percent for pork and 2.3 percent for dairy and related products.

Further, the USDA reported that a strong U.S. dollar has led the nation’s agricultural exports to decline some $1 billion in 2016. Imports, on the other hand, increased by an estimated $7 billion. Not all segments saw prices drop. Fresh fruit prices actually rose 2.2 percent, said the USDA. But overall, however, it has been a down year for food prices as the domestic supply greatly increased.

Deflation in food prices led to a rise in supermarket promotions, noted SupermarketGuru, as grocers passed on lower prices to their shoppers as a means to gain an edge against brick-and-mortar competitors and growing sales in the eCommerce sector (Amazon Go, anyone?).

While shoppers have benefited from the price wars, stores weren’t so lucky. Supermarkets had to eat from their margins to stay afloat in 2016 — resulting in layoffs and closing stores and manufacturing facilities. While grocerants, streamlining initiatives and in-store digitization are being used to combat the effects of food deflation and eCommerce supremacy, many major grocers lost large chunks of their value last year.

As brick-and-mortar supermarkets, by and large, struggle and work to keep pace with a changing industry, the online grocery sector keeps developing new ways to streamline its operations end to end.

Ocado, the world’s largest online-only grocery retailer, recently announced it is working with universities in Europe to develop robotic solutions for Ocado’s automated warehouses as part of the SoMa project — a continuum of robotics and engineering R&D projects in development at the company.

Dr. Graham Deacon, robotics research team leader at Ocado, said: “Ocado and its academic partners are developing some of the most innovative technologies in the field of robotics. With SoMa, we are pursuing a new direction for robotic grasping by developing robot hands that can safely pick easily damageable items such as fruits and vegetables.”

The Ocado Technology robotics team reportedly created a robotic arm capable of holding a wide variety of various-shaped supermarket goods without damaging them. The robotic arm comes as a result of a collaboration between Ocado Technology and the Technische Universität Berlin.

Last year, Ocado rolled out a 4G wireless warehouse automation protocol, a way to communicate with and between the company’s warehouse robots, connecting each of the 1,000-plus robots roaming around the warehouse 10 times per second.