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Friday, March 2, 2012

The logic of food (and other) inflation

Observation:   This week, an article from Food, Nutrition and Science magazine explains the USDA forecast for higher food prices in the coming years.   (I found the story through a newsletter from Phil Lempert.)   Click here to see the full story.

Implications:   Greater demand from emerging economies will impact the world’s food supply, as will the use of corn and other crops for the production of bio-fuels.  You and I will compete (at the supermarket checkout) in the complex global auction that food commodities have become.

When (not if) food prices go up, then we’ll be spending more at the grocery store and restaurants.  When (not if) gas prices go up, we’ll be spending more on everything else.  Chances are good that you’ll have to raise prices in your own business—regardless of the goods or services you sell—within the next few years.  Have you begun having that conversation with your customers?  By that, I mean:  Are you doing a good job of reminding your most important clients how you deliver value to their lives?

And just as important, in a world whose real income is likely to be either constrained or contracted in the coming years (when adjusted for inflation), are you positioning yourself to compete for tighter discretionary dollars?

Mike Anderson, for the Elm Street Economics consumer trends blog. A service of The Center for Sales Strategy, Inc.

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