The Blubber

almart CEO Doug McMillon sees food inflation ticking up as we head into 2025, but he noted that consumers have proven more resilient than retailers initially expected.

McMillon made these comments at the 2024 Morgan Stanley Global Consumer and Retail Conference on Tuesday, expressing disappointment at the resurgence of climbing food prices.

“[Food inflation] is primarily driven by eggs and dairy, but it’s not just those categories,” McMillon said. “There’s also pressure on cocoa and other inputs.”

Food prices have not yet returned to pre-pandemic levels, and McMillon expects food inflation to remain a challenge in 2025.

Walmart has suppliers stepping up to help drive volume, and McMillon anticipates that egg and milk prices will adjust faster than dry grocery prices. In fact, he projects that processed food prices may not decrease at all next year.

In October, food inflation accelerated slightly, with prices rising 1.8% year over year across all food and beverages. The average price for a dozen eggs in October was about $3.37, down slightly from September but still 63% higher compared to last year.

An avian flu outbreak continues to drive up egg prices, with more than 6 million birds slaughtered in November alone. The overall flock has decreased by about 3% over the past year.

Dairy prices also saw a slight increase in October.

However, consumers have managed to weather the storm, which has been especially positive news for Walmart.

With its strongest food unit volume growth in four years, the Bentonville, Ark.-based retailer exceeded earnings and revenue expectations in the third quarter and raised its full-year guidance.

According to the latest data from Numerator, Walmart now leads all retailers in CPG spend, commanding 21.2% of the market share.

Walmart has also rolled back prices on over 7,000 items across various categories, helping attract shoppers at both the high and low ends of the income bracket.

“A couple of years ago, I spoke with my peers—CEOs of suppliers and other business leaders—and we all agreed that storm clouds were on the horizon, and there might be a hard landing,” McMillon said. “I saw those storm clouds, but the wind never blew them this way, and they’ve dissipated. Now, I don’t feel the same way.”

While McMillon doesn't know what "shocks" may occur moving forward, he believes the U.S. economy has held up well.