Why mayo, chips and pop got so expensive so fast

Since the beginning of 2020, the price of groceries has jumped 25%.

Before that, it took 16 years for food prices to rise that much, so it's no wonder sticker shock still stings even as inflation recedes.

"People have 'anchored' mental expectations as to what prices 'should' be, and these anchors take a long time to move," according to a recent report from CoBank. "In our conversations across the country, people are not yet at peace with the reality that a shopping cart full of groceries will now cost $300 compared to $240 just three years ago."

The U.S. Department of Agriculture (USDA) predicts grocery prices should fall slightly by the end of 2024, but that won't erase the rapid gains of the past several years.

Prices rose in recent years largely in response to a higher cost of producing goods, including wages, transportation, warehousing, raw ingredients and, more recently, interest rates. Supply chain issues also meant there wasn't always enough product on shelves to meet demand.

While food prices are expected to fluctuate through time, there might be a new floor for many items as higher wages remain baked into the price on the shelf.

"Elevated prices will continue to impact consumer shopping behaviors, even amid pockets of deflation in certain categories — namely eggs, chicken and seafood — and expectations of lower prices in other grocery goods in the coming year," the CoBank report found.

A 1-pound bag of potato chips first crossed the $4 threshold after the 2008 recession and never went back. This fall, a bag of chips averaged around $6.50, and so far, there has been no going back below $6.

Supply and demand are again to blame for the nearly 50% increase since 2020. Consumers snatched up comfort foods during the pandemic — no matter the price — causing shortages and reinforcing manufacturers' ability to charge higher prices. Meanwhile, the country is growing fewer potatoes.

And while the BLS doesn't track the retail price of corn chips, the cost to make them has increased 40%. Chip makers have largely passed along those costs to consumers, just like with potato chips.

Frito-Lay earned an operating profit of 30 cents for every dollar of Doritos and other chips sold through the first three quarters of the year, the same profit margin the PepsiCo subsidiary had in 2019.

The wholesale price of canned soups and stews rose sharply in 2022, and through the past three years, it's up 40%.

High fertilizer prices and a variety of global weather, war, supply chain and energy issues have contributed to high commodity costs.

The wholesale price of mayonnaise and other salad dressings rose 33% since 2020. The reasons for at least some of that: a record spike in egg prices due to bird flu wiping out flocks of egg-laying hens in recent years and insatiable consumer demand for the cheap protein.

The other main ingredient in many mayo brands, soybean oil, also reached record prices in recent years partly from limited supplies of other oilseeds and Russia's war in Ukraine, according to the USDA.

Egg prices have fallen, though not to pre-pandemic levels, and soybean harvests and oil production have risen. Mayo prices might be the metric worth watching to see if the USDA's prediction of grocery deflation, however slight, pans out next year.

Americans are drinking less milk every year, but they're eating considerably more cheese — 40 pounds per person per year, according to USDA stats. That's compared with 33 pounds per capita a decade ago. Higher demand helped push cheddar prices past $6 a pound for the first time on record last year.

The USDA expects cheese prices to stabilize through next year, and cheddar, at least, should fall back below highs seen in 2022.

The average price per pound for chicken breasts has hovered between $3 and $3.50 for most of the 21st century, but it jumped to $4.75 last year after the bird flu outbreak. The epidemic reduced supplies of America's favorite meat in terms of pounds consumed annually.

Next year, the USDA expects consumption to remain steady and production to increase, meaning prices should continue a recent decline from that 2022 spike.

Chicken (prices) can fly, but they can't stay airborne.

A 12-pack of soda pop is suddenly an eye-popping sum: $6.60 for a dozen 12-ounce cans, on average. Soft drink prices are up 53% from the beginning of 2020.

"We need to focus on controlling what we can control and investing to drive the business," Coca-Cola CEO James Quincey said in October.

When Russia invaded Ukraine in early 2022, it cut off the world's leading supplier of sunflower oil. Commodity traders and food companies scrambled to secure other seed oils — palm, canola and soy — which rapidly pushed up prices as a result of low supply and high demand.

Prices for the cooking and baking staple, which consumers use but not as prevalently as food manufacturers, are up 38% since 2020, as a result of the war and other cost increases in agriculture. And unlike other items with prices that have fallen or leveled off in recent months, as of November, the price on the shelf was still increasing.

Global oilseed prices have dropped considerably in the past year, according to the USDA, and Ukraine's sunflower oil is back on the market and cheaper than ever, which could bring down vegetable oil prices at grocery stores ‚ eventually.

Google searches for "homemade baby food" have surged in recent weeks, and there's no question why: The store-bought stuff is just too expensive.