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January PPI (LANC)

The PPI for food manufacturing increased by 9.1% in January, decelerating from 10.8% in December. The two-year average was 11.7%, similar to the past four months. If the two-year trend holds food manufacturing PPI will be flattish for the next three months.

Staples Insights | January PPI (LANC), Online grocery (KR), Grocery tax relief (WMT) - staples insights 21623

The PPI for fats and oils increased 11.4% YOY in January, decelerating from 14.5% in December. The rate of change in January was the lowest since January 2021. On the most recent conference call, Lancaster Colony said it has no intention to rollback price increases due to the inflationary pressures continuing.

Staples Insights | January PPI (LANC), Online grocery (KR), Grocery tax relief (WMT) - staples insights 21623 2

Online grocery slips (KR, ACI)

Online grocery sales in January decreased by 1.2% compared to the prior year and decreased by 7.7% compared to December. Pickup’s grew 2.5% in January and was the only channel with growth. Delivery sales were flat YOY. Ship-to-home sales fell 15%. Online grocery sales represented 12% of total grocery spending in the month according to Brick Meets Click. Average order value increased by 8% for pickup and 6% for delivery while ship-to-home fell by 5%. Overall online grocery MAUs decreased by 1.6%. The MAUs for mass retailers grew by 20% while supermarket MAUs decreased by 6%.

The monthly survey also showed a drop in repeat intent over the next 30 days. The overall repeat intent was 60%, down 2% from the prior month. The repeat intent for supermarkets was slightly higher than 50%, more than 14% points lower than it was for mass retailers. It was the widest gap between the two retail channels and a negative omen for conventional grocers.

Kroger’s head of e-commerce is leaving this month. Digital may be entering a new phase for traditional supermarkets, one focused more on improving margins rather than achieving growth.

Staples Insights | January PPI (LANC), Online grocery (KR), Grocery tax relief (WMT) - staples insights 21623 3

Grocery tax relief (WMT)

Several states that have a sales tax on groceries are considering making a change. There are 13 states that tax grocery sales as of last January. Five of those states are looking to reduce, eliminate or suspend their tax. SNAP recipients are generally shielded from grocery taxes collected at the register.

In Mississippi, legislators are considering cutting the tax on groceries by at least half. In Tennessee, Governor Bill Lee proposed a three month holiday from grocery taxes this year after a four-week suspension in 2022. Oklahoma and Louisiana are considering ending their grocery taxes while Illinois is reinstituting its grocery tax. State budgets have fared better with federal assistance and are better able now to offset the lost grocery tax income.