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July 18, 2020, 8:09 a.m. EDT

Online food prices jump as food companies struggle to meet demand

Digital purchasing power has fallen into negative territory for the first time ever, according to Adobe data

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By Tonya Garcia, MarketWatch


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FreshDirect is just one company selling groceries online, a service that has been in high demand since the coronavirus pandemic hit the U.S.

Online food prices have climbed 4.2% over the past six months according to the latest Adobe Inc. data as grocery e-commerce accelerated amid the COVID-19 pandemic and food producers struggled to keep up with continued high demand.

“We’ve always thought of the online marketplace as a ‘value marketplace’ for consumers, meaning consumers can get a bit more bang for their buck, and this is supposed to be a more favorable time of year for them in terms of prices,” said Vivek Pandya, digital insights manager at Adobe. “But they aren’t getting that relief.”

Grocery prices typically go up in the second half of the year as the holidays roll around, Adobe /zigman2/quotes/200389143/composite ADBE -1.82% wrote on its blog . But the increase in food prices was a bit extreme when compared with the latest consumer inflation data.

“Food at home” costs have gone up 5.6% on a yearly basis, according to government data released on Tuesday. That’s the highest jump since 2011.

Read: Higher gas, food prices trigger first increase in consumer inflation in four months

U.S. online grocery sales rose 9% month-over-month in June, reaching $7.2 billion, according to the Brick Meets Click/Mercatus Grocery Survey.

That survey found that the June sales increase corresponded with increased concern about contracting coronavirus and as more food retailers offered the option for grocery pickup after ordering online.

See: The meat industry will be completely gone in 15 years, Impossible Foods CEO says

“This increase in online grocery capacity has flipped the equation,” said David Bishop, partner and research lead at Brick Meets Click. “Today as shoppers have more choice, the increased capacity is now actually enabling the continued growth of online grocery.”

The number of coronavirus cases in the U.S. has reached 3.3 million with Florida counting a record of more than 15,000 new cases on Sunday. The U.S. death toll is more than 135,000. Some state legislators and public health officials have called for stay-at-home orders as the number of cases surge.

Overall, Adobe found that e-commerce spending was $77 billion higher than expected while inflation has driven digital purchasing power (DPP) into negative territory for the first time ever, “which means consumers can now purchase goods online for $1.01 that would have cost $1.00 in June 2019,” Adobe said.

The SPDR S&P Retail ETF /zigman2/quotes/206947004/composite XRT -0.65% is down 5.6% for the year to date. The Invesco Dynamic Food and Beverage ETF /zigman2/quotes/200461180/composite PBJ -1.13% is down 8.3%. And the S&P 500 index /zigman2/quotes/210599714/realtime SPX -0.80% has slipped 2.2% for the period.

“Online grocery orders for delivery or curbside collection have grown significantly and we expect online penetration to grow structurally,” Fitch Ratings wrote in a report about global corporate recovery from coronavirus.

Read: Grocery prices are rising as eat-at-home demand soars during the pandemic

“Some weaker regional companies with limited investment capacity may be unable to support robust omnichannel models and will lose share to better-capitalized companies.”

/zigman2/quotes/200389143/composite
US : U.S.: Nasdaq
$ 435.23
-8.06 -1.82%
Volume: 1.90M
Aug. 11, 2020 4:00p
P/E Ratio
57.40
Dividend Yield
N/A
Market Cap
$212.63 billion
Rev. per Employee
$445,024
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/zigman2/quotes/206947004/composite
US : U.S.: NYSE Arca
$ 50.66
-0.33 -0.65%
Volume: 4.51M
Aug. 11, 2020 4:00p
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/zigman2/quotes/200461180/composite
US : U.S.: NYSE Arca
$ 33.33
-0.38 -1.13%
Volume: 36,201
Aug. 11, 2020 3:42p
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/zigman2/quotes/210599714/realtime
US : S&P US
3,333.69
-26.78 -0.80%
Volume: 2.90B
Aug. 11, 2020 5:08p
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