A CASE STUDY

Presented to the
Faculty of School of Business Administration
of College of Science, Technology and Communication Inc.

In Partial Fulfillment of the

Requirements for the Degree of
Bachelor of Science Major in Accountancy-3

By:
Esguerra, Shane Ann P.
Panaligan, Maria Jemima
Perillo, Kristine Kaye
Mercurio, John Patrick

December 7, 2021
 Chapter I

INFLUENCE OF INFLATION TO
THE PRICE OF MEAT PROCESSED FOODS
 Chapter II
CASE DIGEST

Exclusive: Even hot dogs, burgers, and deli meats will soon get more expensive
By Nathaniel Meyersohn, CNN Business
Published Nov 10, 2021 11:01:32 AM

(CNN) — Shoppers are already taking a hit at the grocery store. Soon, even their
cheapest meat options will get more expensive.
Tyson Foods, Conagra, and Kraft Heinz have notified their retail customers in recent
weeks that they will raise prices in January for some frozen and refrigerated meats.
Products that will see increases include Ball Park hot dogs and burgers, State Fair
corn dogs, Jimmy Dean frozen breakfast, Hillshire Farm sausage and lunch meat, and
Hebrew National and Oscar Mayer hot dogs, according to supplier letters to wholesale
customers viewed by CNN Business.

"All the packaged meat suppliers are coming to the price increase party," said a leader
at one regional distributor to stores who spoke on the condition of anonymity to
protect their company's relationship with suppliers.
Prices for higher-end meat cuts like steak, veal, and pork chops have surged over the
past year. But prices for cheaper meats like ground beef and lunch meat have gone up
more slowly, while hot dog prices were actually 1.2% lower in September than they
were at the same time last year, according to the latest data from the Bureau of Labor
Statistics.

If top suppliers' customers — which include big box stores, supermarkets, drug stores,
and others — decide to pass on these latest increases, even the meats shoppers
typically look to trade down to when prices rise will become costlier. That may
prompt some shoppers to avoid meat cases at grocery stores or turn to discount
chains, such as Aldi and dollar stores, analysts predict.
"Meat is center of the plate for Americans, and these price increases will hit hard,"
Chris DuBois, the senior vice president for protein practice at market research firm
IRI and who consults with grocers on meat trends and strategies, said in an email.
Meat producers are hiking prices and reducing promotions on items to combat higher
costs for commodities, packaging, labor, transportation, and other inputs.
Tyson sent a letter to at least two regional distributors last month in which it said that
prices on Ball Park, Hillshire Farm, Jimmy Dean, State Fair, and all deli meats will
increase by a range of 5% to 10.2% beginning January 2 for "all retail customers."
The distributors shared the letters with CNN Business on the condition of anonymity.
"We continue to face accelerating levels of extraordinary inflation," Tyson said in the
letter. "The sustained duration and significant impact of the inflation necessitates
additional pricing action."

A Tyson spokesperson said in an email to CNN Business that the company was
"carefully managing these inflationary pressures through pricing actions and efforts to
reduce costs."

Conagra alerted one of the distributors this week that it will hike prices starting
January 24 for varieties of Hebrew National hot dog packages, such as beef franks,
97% fat free beef franks, and jumbo beef franks, as well as quarter-pound and bun-
length beef franks. The price increases range from 10.9% to 12.6%.
In the letter, Conagra said it was cutting costs throughout its operations, but the
"sustained increase in packaging and ingredients will require" the company to raise
prices.

A spokesperson for Conagra did not say how many retail customers were notified of
price increases.

Kraft Heinz said in a November 1 letter to retail customers that it will raise prices for
varieties of Oscar Mayer beef, lean beef and Angus hot dogs, as well as cheese dogs,
by around 8% effective January 9.
A spokesperson for Kraft Heinz told CNN Business the price increases applied to all
of the company's retail customers. The company has increased prices by an average of
5% on 80% of its products "to help offset the escalating inflation that the entire
industry is facing," the spokesperson said. At the same time, Kraft is also introducing
more affordable price points and value sizes on brands such as Lunchables.
Price increases on meat and other grocery store staples may force changes to
consumer behavior and pose a threat to supermarkets, said IRI's DuBois. When prices
at customers' regular stores become unaffordable, they are more willing to leave the
store for cheaper ones.

"That's the big unspoken danger that many retailers are worried about right now. We
could see some big retail market share shifts starting next year."

This story was first published on CNN.com "Exclusive: Even hot dogs, burgers and
deli meats will soon get more expensive"
 Chapter III
OBJECTIVES

The following are the objectives and goals of this study:

 To determine the factors affecting the inflation.

 To determine how the price of meat processed products are affected to inflation.
 To better understand and know what will be the solution if inflation occurs in the
price of meat processed foods.
 To identify the flow of prices of meat processed foods if there’s no inflation
involved.
 Chapter IV
Related Literature

Food prices in the Philippines increased by 5.3 percent year-on-year in

October 2021, easing from a 6.2 percent rise in the prior month. It was the lowest
food inflation since July, as cost slowed for meat (11.9 percent vs 15.6 percent); fish
(9.5 percent vs 10.2 percent); vegetables (11.4 percent vs 16.2 percent). Meantime,
inflation was unchanged for milk, cheese, egg (at 0.7 percent), food products, N.E.C
(at 1.9 percent). By contrast, prices accelerated for corn (13.5 percent vs 10 percent);
other cereals, flour, cereal preparations (2.1 percent vs 2 percent); oils and fats (5.4
percent vs 5.2 percent); sugar, jam, honey, chocolate & confectionery (1.7 percent vs
1.4 percent), and those rebounded for fruits (0.2 percent vs -0.4 percent), while prices
of rice advanced 0.5 percent, after being flat in September. source: Philippine
Statistics Authority
Foreign Study

Kim (2021) stated that, amid a higher than expected 6.2% increase in
consumer prices in October compared to the same month last year, the price of meat,
poultry, fish and eggs rose 11.9%, the fastest increase since December 1990, the
Bureau of Labor Statistics said Wednesday, with beef prices up 20.1% and pork up
14.1%, adding to concerns that inflation will stick around longer than expected.
Federal Reserve Chair Jerome Powell has repeatedly said that high inflation is
“transitory,” blaming supply chain constraints. “Inflation is elevated, largely
reflecting factors that are expected to be transitory,” the Federal Reserve said in a
statement on the second day of the two-day policy meeting earlier this month.
“Supply and demand imbalances related to the pandemic and the reopening of the
economy have contributed to sizable price increases in some sectors.” Worker
shortages and supply chain constraints have boosted prices across North America.
Even the affordable meat options are expected to rise in the coming months. Tyson
Foods, Conagra, and Kraft Heinz are reportedly set to charge more for some frozen
and refrigerated meat products, such as Ball Park hot dogs and State Fair corn dogs,
starting in January, CNN reported.
 For the inflation rate in beef products according to USDA (2021), Wholesale
beef prices decreased 11.2 percent from September to October 2021, but are still 23.7
percent higher, on average, in 2021 compared to 2020. Despite the month-over-month
price decrease for wholesale beef, prices were 41.5 percent higher in October 2021
than in October 2020. High feed costs, increased demand, and changes in the supply
chain have increased prices for wholesale beef. Concentration and capacity
constraints within the meat industry could also affect meat prices and spreads between
different points along the supply chain. Wholesale beef prices are predicted to
increase between 23.0 and 26.0 percent in 2021. As with beef, wholesale pork prices
also decreased slightly from September to October—by 1.6 percent—following
another slight price decrease from August to September.
Given this decreasing trend, forecasts have been adjusted
downward: wholesale pork prices are predicted to increase between 16.0 and 19.0
percent in 2021—an adjustment downward from the 17.0 to 20.0 percent predicted
last month.

Local Study

According to de Vera et al. (2021) on "High Meat, Fuel Prices Kept PH

Inflation Elevated in April", the Philippines’ inflation rate remained at 4.5 percent
year-on-year in April even as meat, especially pork, remained expensive. Food
inflation, which accounted for the bulk of the consumer price index basket, rose 4.8
percent in April, mainly as meat prices soared 22.1 percent year-on-year. Mapa said
pork prices jumped by a faster 57.7 percent year-on-year last month compared to the
51.8-percent increase in March as the price cap imposed by President Duterte lapsed.
In response, the central bank said the latest inflation figure “is consistent with
expectations that inflation would remain elevated this year” owing to supply-side
pressures, before settling close to the midpoint of the target range next year. To bring
down pork prices, President Duterte slashed tariffs and hiked the minimum access
volume quota to augment domestic supply with more imports amid the African swine
fever scare.
 Ball and Mankiw (1995) noted that Friedman’s analysis implicitly assumes
that nominal prices of meat and other agricultural product are perfectly flexible.
However, this is not often the case in the short run. Frictions, like menu costs, can
affect price changes. Firms experiencing price shocks will only change their prices if
the desired adjustment is large enough to warrant paying the associated menu cost.
IMF (2006), while improved monetary policy credibility can account for a large part
of the decline in the sensitivity of prices, more than half of it is accounted for by other
factors, including global factors. In the case of the Philippines, increased trade
openness is cited as an important factor that led to lower frequency of price changes
and the lengthening of the duration between price adjustments in the economy.
 Chapter V
Courses of Action

As the inflation rate becomes the most concern during this Covid-19 pandemic,
preparedness and urgency to respond is essential to ease the burden for the Filipinos.
The following are the possible solutions that this study offers:
Chapter VI
Conclusion
 Chapter VII
Recommendation
 Chapter VIII
References

Kim, L. (2021, November 10). ‘Meatflation’ worsens as prices rise at fastest rate in
30 years In October.
https://www.google.com/amp/s/www.forbes.com/sites/lisakim/2021/11/10/meatflatio
n-gets-worse-in-latest-inflation-report-as-beef-prices-skyrocket-to-decades-
highs/amp/

De Vera, B., & Lucas, D. (2021, May 6). High meat, fuel prices kept PH inflation
elevated in April. https://www.google.com/amp/s/business.inquirer.net/322385/high-
meat-fuel-prices-kept-ph-inflation-elevated-in-april/amp

USDA(2021), Food Price Outlook, 2021.Consumer Price Index for

Food.https://www.ers.usda.gov/data-products/food-price-outlook/summary-findings/

Ball and Mankiw (1995). Impact of relative price changes and asymmetric
adjustments on aggregate inflation: evidence from the
Philippines.https://www.bis.org/publ/bppdf/bispap111_k.pdf

IMF (2006). Impact of relative price changes and asymmetric adjustments on

aggregate inflation: evidence from the Philippines
https://www.bis.org/publ/bppdf/bispap111_k.pdf

Trading Economics (2021, November 30). Philippines Food Inflation | 2021 Data |
2022 Forecast | 1995-2020 Historical | Chart (tradingeconomics.com)
https://tradingeconomics.com/philippines/food-inflation