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How inflation will hit your dinner table this Thanksgiving

Spooky season may be over, but buyers beware as grocery store prices show no signs of tipping down as Thanksgiving, full of festive and large meals, creeps closer.

In 2021, the average cost for a Thanksgiving dinner to feed 10 guests was $53.31 according to the American Farm Bureau Federation Survey. Despite being able to feed each person for less than $6, last year's Thanksgiving was a 14% price increase from 2020. Two years out from the start of the pandemic, and Thanksgiving dinner stands to see yet another uptick in cost.

In recent decades, the average annual increase for grocery items has been between 2% and 4%, said Aaron Garvey, associate professor at the Gatton College of Business and Economics at the University of Kentucky.

But consumers might be in for a big shock this year.

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In September, the consumer price index, which measures price changes from a consumer perspective, indicates “food at home” prices rose 13% when compared to the previous 12 months, according to the U.S. Bureau of Labor Statistics. When compared to last year, September also saw an 8.5% price increase in the producer price index, which measures price change from the perspective of the seller.

“Grocery and restaurants stores are in many instances passing on to consumers the higher costs that manufacturers are charging,” Garvey said.

As both the sellers of food items and the consumers see price increases, the consumer will shoulder the price increase the most. Here's what that means for your Thanksgiving Day meal.

Why are food prices increasing?

Several factors have been key contributors to rising prices. To start, the pandemic caused a classic supply and demand problem.

“At the start of the COVID shutdowns, we saw an increase in grocery sales that may be the highest on record, at least in the past 30 years. Grocery store sales increased almost 30% overnight,” said Uric Dufrene, the Sanders Chair in business at Indiana University Southeast.

This sharp demand increase in consumers' stock-piling groceries depleted the available supply. On top of that, there were several manufacturer plant closures, labor shortages forcing higher wages, and increasing costs of transportation.

Aside from the pandemic, the ongoing war between Ukraine and Russia has spillover effects on grocery items in the U.S. Ukraine is a large exporter of grains and vegetable oil products. With a shortage of supply, consumers are seeing things like a 32% price jump in butter and margarine products.

However, the University of Kentucky’s Garvey said, “Just how much each of these factors are contributing to the price increases at local grocery stores and restaurants remains unclear.”

Rainbow Blossom on Lexington Rd. Thursday morning.Nov. 3, 2022
Rainbow Blossom on Lexington Rd. Thursday morning.Nov. 3, 2022

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In 2021, Kentucky saw a 12.1% increase in consumer spending from 2020, according to the U.S. Bureau of Economic Analysis.

“Interestingly, even with higher food prices and despite inflation overall, we are currently seeing high levels of consumer spending and a strong labor market,” said Carla Childers, an associate professor of marketing at Bellarmine University. “By and large, people must eat and will continue to purchase groceries during economic ambiguity.”

What can consumers do to keep Thanksgiving meal prices down?

Joshua Mauser was shopping at Rainbow Blossom on Lexington Rd. Thursday morning.Nov. 3, 2022
Joshua Mauser was shopping at Rainbow Blossom on Lexington Rd. Thursday morning.Nov. 3, 2022

As shoppers search for a way to stretch their dollars, Dufrene notes it may be time for consumers to break their brand loyalty and consider turning to store-brand items.

“Grocery stores are aware that when prices in a category rise rapidly, consumers often switch to lower priced alternatives such as store brands in the short term,” Garvey said.

Kroger, the Cincinnati-based chain grocer who recently acquired Albertsons, said they do not expect any issues providing customers with the Thanksgiving favorites they are looking for at a competitive price.

"At Kroger, we understand how important turkey is as the center of many plates for our customers celebrating Thanksgiving as well as their favorite side dishes," said Jessica Sharp, a corporate affairs manager for the Louisville division of Kroger.

Rainbow Blossom on Lexington Rd. Thursday morning.Nov. 3, 2022
Rainbow Blossom on Lexington Rd. Thursday morning.Nov. 3, 2022

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In some instances, it isn’t the individual item price increase that will make a difference for the consumer, but rather the combined total of all items. Garvey said this is often due to manufacturers and retailers taking advantage of the effect researchers have coined the "just noticeable difference" threshold.

For example, if a jar of your preferred brand of peanut butter cost $4.49, an increase to $4.79 would likely go unnoticed. Now that you accept $4.79 as the normal price, an increase to $4.99 wouldn’t be a call for alarm either. However, the ultimate new price is nearly 10% higher, but this overall increase will go unnoticed by many consumers.

“It adds up across all the products in the cart and can make for sticker shock at checkout,” Garvey said.

Some advice for consumers right now: consider switching brands, pay attention to how much an item costs per unit or ounce because bigger does not always equal cheaper, and be aware of the gradual and subtle price increases on individual items over time.

Is it cheaper to shop at smaller grocery stores?

Rainbow Blossom on Lexington Rd. Thursday morning.Nov. 3, 2022
Rainbow Blossom on Lexington Rd. Thursday morning.Nov. 3, 2022

Natural grocers, often seen as big box store's high-end cousin, may actually be faring better for the consumers currently.

Summer Auerbach, a second-generation owner of the local natural grocer chain Rainbow Blossom, said that while her stores have seen price increases, the natural grocery industry has lagged behind the inflation of the conventional industry.

“Relative to the more traditional kind of chain grocery, the natural channel has not seen as large increases,” Auerbach said. “Our local products have not been increasing as much as the national.”

Of the hundreds of local products the five Rainbow Blossom locations carry, Auerbach can only recall one local supplier that has made a substantial price increase. Local suppliers, unlike large-scale national vendors, may not face the same increases in transportation and shipping costs, allowing them to keep prices lower.

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Auerbach also said that as a family-owned business, it is important to consider the customer first. Rather than passing on inflated prices to consumers, Rainbow Blossom is choosing to take most of the price hit.

Joshua Mauser was shopping at Rainbow Blossom on Lexington Rd. Thursday morning.Nov. 3, 2022
Joshua Mauser was shopping at Rainbow Blossom on Lexington Rd. Thursday morning.Nov. 3, 2022

At Rainbow Blossom, customers can order a Thanksgiving turkey in advance. This year, turkey prices range from $3.99 per pound to $5.79 per pound for a whole turkey. Auerbach said the local turkeys saw the lowest price increase of only 60 cents compared to last year and the organic ones increased the most, close to $1.50 more per pound.

The 60-cent increase for local turkeys is about a 17% price increase, which is below the national increase for turkeys.

“But again, it's like the local even though they did increase, that's much lower than some of the other (stores),” Auerbach said.

Josh Mauser, a lifelong Louisville resident and regular at Rainbow Blossom, said the rising prices at his favorite grocer have him more conscious of what he will and won’t buy. The biggest difference he’s noticed has been in the vegan food items.

“The vegan items like the cheeses and things, I mean, they used to be like $4 a bag, and now for a bag of vegan cheese it's like $7,” Mauser said.

How have food price increases hit the restaurant industry?

The conventional grocery industry is not alone in feeling the heat of price increases. The restaurant industry is also taking the heat.

Matt Rich, owner and operator of Gourmet Provisions, 9407 Westport Road, said this year his nine to 12-person Thanksgiving dinner has nearly doubled in price when compared with the same meal in 2020. In 2020, the dinner which includes a 15-pound turkey, rolls, whipped potatoes, green beans, truffle mushroom stuffing, and more cost roughly $115.

This year Rich is selling the meal for $220. And pre-orders are already sold out.

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“Of course, I'm not happy about it. I hope that our meal is worth everybody's $220," Rich said. "I hope that it has the value to carry that price tag."

Joshua Mauser was shopping at Rainbow Blossom on Lexington Rd. Thursday morning.Nov. 3, 2022
Joshua Mauser was shopping at Rainbow Blossom on Lexington Rd. Thursday morning.Nov. 3, 2022

Rich explained the biggest change is national restaurant vendors no longer offer a 20% to 25% discount on bulk items, making it more difficult for restaurants to avoid price spikes. This has forced Rich to join the average consumer and find himself perusing Kroger and Costco to find the best deals on kitchen staples.

“The groceries that you buy that are $100, chances are the restaurants that just bought those same groceries from a vendor, they are probably a little bit more expensive because of shipping costs,” Rich said.

Another industry feeling pressure right now is the turkey farming industry. According to the producer price index, processed turkeys are up nearly 40% in price compared to last year and slaughtered turkeys are up almost 21%.

Amy and Dan Skinner, owners of Skinner Farms in Shelby County, Kentucky, process and sells pastured turkeys. Compared to last year, Skinner has increased the cost of its turkeys by 15%, which is below the national average. 

Skinner Farms near Louisville raises 140 young broad-breasted white turkeys to sell for Thanksgiving.
Oct. 7, 2021
Skinner Farms near Louisville raises 140 young broad-breasted white turkeys to sell for Thanksgiving. Oct. 7, 2021

“That's a small increase when compared to our increasing costs,” Amy Skinner said.

The farm is seeing growing costs in two major areas: transportation to go get their animals checked by the USDA and feed for the animals, which is up 40% from last year, she said.

“Like everyone, we're hoping things get better ... soon,” she said.

Contact reporter Olivia Evans at oevans@courier-journal.com or on Twitter at @oliviamevans_

This article originally appeared on Louisville Courier Journal: Turkey prices are up: Inflation to raise food, Thanksgiving prices