Editor's Blog: Fill 'er up!
Feb. 17, 2015
by Joel Crews
KANSAS CITY, Mo. – Even though gas prices are inching back up, it was just weeks ago that I marveled at filling my tank for $1.69 per gallon in Kansas City. Nationally, the average price for Regular gasoline has gone from $3.01 per gallon in late October, bottomed out at $1.98 in late January and now is in the fourth straight week of ascending, to 2.13 as of Feb. 9, according to the US Energy Information Administration.
Theories for the lower gas prices are as varied as the car wash options available at the pump, but whatever the reason, the extra money in consumers’ pockets is significant and has the attention of food companies, retailers and foodservice outlets. As recently as last week, executives at Pilgrim’s Pride addressed the topic and the positive impact it can have on food purchases and the company’s bottom line. Fabio Sandri, Pilgrim’s CFO told analysts that lower gas prices are contributing to demand that is outpacing supply.
During a conference call, Sandri addressed the issue: “The American consumer is experiencing more available income and there could be a potential improvement, especially in the foodservice sector,” he said (Read more details about the conference call).
Pilgrim’s isn’t the only processor to note the positive affect of the good news that was on few, if any financial radars. At the end of 2014, as gas prices were in the early stages of their descent, Tyson Foods President and CEO, Donnie Smith addressed what giddy drivers couldn’t help but notice at the pump. In an earnings statement issued Nov. 17, Smith acknowledged that while lower gas prices wouldn’t likely result in consumers trading up to higher-priced beef, but instead behoove them to purchase even more chicken and bolster the foodservice sector.
“We see more people eating out with the relief they are getting in gas prices,” Smith said, “which should benefit foodservice customers.”
The company finished what was a profitable 2014 fiscal year looking ahead to 2015 with expectations of surpassing $40 billion in sales (Read more about plans for what Smith called “Tyson 2.0”).
Gas prices have inched up since bottoming out in late January.
Even retailers that sell gas are expressing optimism over the lower prices. Officials with the largest convenience store chain, Dallas-based 7-Eleven Inc., say in-store traffic and purchases of drinks, snacks and fresh food have ticked up as pump prices have dropped.
In a Feb. 10 Dallas Morning News report, Margaret Chabris, spokeswoman for 7-Eleven said, “Gas sales, in-store sales and customer counts are up.” She added: “Customers have more money in their pockets to spend with the lower price of gasoline.”
For many consumers, the savings at the pump resulted in spending run amok, with data indicating recent spending exceeded the would-be extra jingle in pockets. According to this CNBC video, marketing firm Cardlytics reports the winners in the spending splurge ignited by lower gas prices included the foodservice segment, and specifically, quick-service restaurants.
With spring just around the corner and the kick-off to grilling season looming, a significant X-factor for many companies in 2015 will likely continue to be determined by the demeanor of consumers at the pump.