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July 2023, Volume 29, Number 3

Food, Wine

Would more immigration slow food price inflation? IFPA CEO Cathy Burns says: “Immigration reform is the single most important action that can be taken to give relief to Americans struggling to fight unprecedented food inflation and provide healthy food choices for their families.”

Migrant advocates have been arguing that migrants fill jobs that Americans shun, so that their presence does not affect the wages of US workers. Many advocates in summer 2023 reversed course and argued that admitting more migrants would reduce wage growth and inflation.

Meat, dairy, and produce prices fell in 2023, but prices for many packaged foods have continued to increase. National manufacturers dominate the center of supermarkets, and many are trying to maintain profit margins that widened during covid. Walmart and other retailers are trying to persuade manufacturers to reduce the prices of dry goods and to sell more private-label goods.

Covid stay-at-home orders raised the value of food and beverage firms, prompting private equity funds to buy almost 800 such firms for $32 billion in 2021, often using borrowed money. The assumption was the makers of staple foods could always make more money by raising prices: reopening after covid and rising interest rates are proving these assumptions wrong.

Tropicana is an example of a firm bought by private equity with debt that raised prices, lost market share and is no longer making a profit.

Walmart, with 1.7 million US employees in its 5,000 US stores, aims to automate more functions such as moving the fulfillment of online orders into lockers in its stores for pickup. Amazon, which bought Whole Foods in 2006, accounts for three percent of US grocery sales that total $800 billion a year, far less than Walmart’s 30 percent of US grocery sales, Kroger’s 11 percent, and Costco’s 10 percent.

Meat that is cured and smoked often has high levels of nitrates and salt, which raise the risk of heart disease and diabetes. Schools in some cities have banned processed meats and sausages from school lunches.

Americans spent $76 billion in 2022 on weight loss and medical programs, diet soda and low-calorie frozen food, and gym memberships and similar activities classified as part of the diet industry. The behavioral approach to weight loss, eating less and exercising more, may be upended by new GLP-1 weight-loss drugs such as Ozempic, Wegovy and Mounjaro that help people to feel full, with side effects that include nausea and diarrhea. Over 40 percent of American adults are overweight or obese.

The Supplemental Nutrition Assistance Program (SNAP), previously Food Stamps, is one of the largest federal means-tested assistance program, spending $150 billion a year to provide benefits to over 40 million US residents (Medicaid enrolls over 100 million people). The federal government fully funds SNAP benefits and shares the cost of administration 50-50 with states. Over 42 million US residents received an average $205 per month per person in SNAP benefits in March 2023.

House Republicans in the May 2023 agreement to raise the debt ceiling required adults without children and aged 18-54 to work at least 20 hours a week to receive SNAP benefits. Some Republicans want to prevent SNAP benefits from being used to buy soft drinks, candy, ice cream and other snacks, while Democrats favor offering extra benefits to SNAP recipients who buy fruits and vegetables.

Republicans also want to add work requirements for some Medicaid beneficiaries. Medicaid provides health care to poor US residents under 65, and 19 want to add work requirements. Medicaid provides health care services as well as housing, food and counseling. If more states use Medicaid funds to provide non-health services, Medicaid expenditures could rise.

The federal government spent $1.2 trillion on means-tested benefits in FY22 including $600 billion on Medicaid, $200 billion on Earned Income Tax Credits, and $150 billion on SNAP.

American adults walk an average about 6,000 steps a day, below the recommended 8,000 to 10,000 steps a day. About 2,000 steps is one mile; most Americans walk about a mile in 20 minutes and burn 100 calories.

Food prices are rising twice as fast in Europe as in the US, where food prices were up eight percent in the past year. Farmgate food prices peaked in March 2022 after Russia’s invasion of Ukraine and have since declined. Many food suppliers raised prices and have been slow to lower them, prompting some governments to investigate excess profits or greedflation among food manufacturers and supermarkets.

More US restaurants are adding service charges of up to 20 percent that are used at the discretion of the operator. Tips cannot be shared with chefs and other non-servers, and some operators use service charges to compensate non-tipped staff. Most European restaurants add service charges and do not expect additional tips, while some US restaurants levy service charges and expect additional tips.

Bananas are typically the cheapest fresh fruit in supermarkets on a per-pound basis, often selling for $0.50 to $0.75 a pound when apples, berries and grapes are $1 to $4 a pound. About five percent of the world’s bananas are Fairtrade, which promises higher prices to banana growers who share some of the premium with farmers and farm workers.

The Business & Human Rights Resource Centre in May 2023 issued a report alleging that major tea sellers such as Unilever rely too much on certifiers such as Rainforest Alliance and Fair Trade to ensure labor rights on tea plantations. The Ethical Tea Partnership calls on tea sellers to require the plantations to pay living wages to their estimated 1.5 million workers and to respect worker rights.

The price of coffee fell below $2 a pound in fall 2022 from the peak of over $2.50 a pound in February 2022 as normal weather returned to Brazil.

Wine. Global wine production of 258 million hectoliters (one hectoliter is 26.4 gallons, so global production was 6.8 billion gallons) in 2022 exceeded consumption of 232 million hectoliters, putting downward pressure on wine prices. The US was the leading consumer of wine, accounting for 15 percent of global consumption, followed by France, 11 percent, and Italy, 10 percent.

Over 107 million hectoliters of wine worth E38 billion ($41 billion) was exported in 2022. Italy and Spain each exported 22 million hectoliters, but French wine exports were worth E12 billion, almost a third of the value of global wine exports. The US imported 15 million hectoliters of wine and Germany 13 million hectoliters. The average value of exported wine was about E3.50 a liter or less than $3 a bottle.

The global area of vineyards was stable at 7.3 million hectares (18 million acres) for raisin, table and wine grapes. Spain had the acreage of most vineyards, followed by France, China, Italy, Turkey and the US.

Ste. Michelle Wine Estates (SMWE) sold Stag’s Leap to Italy’s Marchesi Antinori in May 2023. SMWE, which was sold to private equity firm Sycamore Partners for $1.3 billion in 2021, has vineyards in California, Oregon and Washington.

New York City’s Sherry-Lehmann Wine & Spirits was accused in June 2023 of not delivering some of the prepaid wine that was stored in Wine Caves, and of selling some wine stored in Wine Caves without the owner’s consent. Sherry-Lehmann says that its business was hurt by Trump-era tariffs on French wine and covid lockdowns.

The Champagne region south of Reims in northern France is one of the world’s most regulated wine growing regions. The 34,000 hectares (85,000 acres) of wine grapes are allowed to produce 10,000 to 12,000 kg/hectare (4.5 to 5.2 tons per acre) that can yield 300 million to 350 million bottles of champagne a year. At E7 per kg, grower revenue is about $30,000 an acre.

France exported 27 million nine-liter cases of champagne in 2002 worth E6 billion, including E1 billion to the US. The two leading brands in the US are Veuve Clicquot and Moët & Chandon.

Australia has too much red wine despite a poor 2023 harvest, a result of a trade dispute with China that eliminated the most important export market. The grower price of some Shiraz and Cabernet grapes dropped to $100 a ton, and some grapes were not picked in April 2023.

Sprits outsold beer in the US for the first time in 2022. Spirits and beer each accounted for about 42 percent of alcohol sales, leaving wine with 16 percent.

Modelo displaced Bud Light as the top-selling beer in the US in mid-2023, accounting for over eight percent of US beer sales in retail stores as Bud Light fell toward seven percent after a boycott in the wake of a transgender endorsement, followed by Coors Light at six percent and Miller Lite at five percent; US beer sales peak during the summer months. Constellation Brands, which owns Robert Mondavi and other wine brands, also owns Corona and Modelo and has three breweries in Mexico.

Canadian-born David Gilmour (1931-2023) created a luxury resort on a former coconut plantation on the Fiji island of Wakaya that attracted Bill and Melinda Gates on their honeymoon. Some brought their own bottled water, prompting Gilmour to bottle and begin exporting Fiji water in 1996 that was acquired by Wonderful in 2004.

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