Campbell's Soup Destroys The Fed's Myth Of 'Transitory' Inflation
Campbell's Condensed Tomato Soup has long been our favorite way to visualize the effects of inflation over time in the U.S. economy. That's because the product is defined by its iconic packaging, a No. 1 size steel can that contains the same amount of condensed tomato soup as it did when the product was first introduced to the public in the late 1800s.
This relative stability in packaging however means Campbell Soup cannot hide the price increases is passes along to its customers through shrinkflation, which many other food producers exploit by keeping the same prices on their goods, but diminishing the amount of goods within them. When inflation drives up the costs of what they have to pay to make and transport their goods to consumers, Campbell's must increase their prices to compensate.
That's what's happening now. Campbell Soup has confirmed it is increasing prices across its product lines:
The markup between wholesale and retail prices give retailers some flexibility in how they might choose to pass their increased costs along to consumers. And that is where we can show how that works, because we've tracked the prices consumers have paid for Campbell's Condensed Tomato Soup since the product rolled out onto grocery store shelves in the late 1800s.
For products like Campbell's Condensed Tomato Soup, retailers pass along their cost increases to consumers by offering fewer and smaller discounts. This marketing strategy lets them hold their shelf prices relatively stable, but only until inflationary pressures rise enough to force retailers to increase their shelf price. Once they do, their higher markups allow them to regain the ability to offer larger discounts.
You can see that dynamic playing out in this chart as prices have periodically stepped upward in 5 to 10 cent intervals since the U.S. government ended its failed attempt to stop inflation through price controls in 1974.As prices have risen, deep discounting becomes much less common and eventually the low prices consumers were once able to pay becomes a thing of the past.
In 2021, the price of Campbell's Condensed Tomato Soup is converging near a shelf price of $1.00 per 10.75 ounce can. In July 2021, the trailing twelve month average discounted sale price is $0.95 per can, which has fallen from a seasonal peak of $0.99 per can in December 2020 thanks largely to some unique pandemic-driven supply and demand dynamics.
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