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August 8, 2022

Movie night at home with takeout food gets more expensive

Market commentary by eToro analyst for Romania, Bogdan Maioreanu


A quiet evening at home with delivery food and a Netflix movie. A picture normal for a lot of us. But “transitory inflation” is hitting this costless form of entertainment too. From the entertainment content to takeout food ingredients, to fuel to deliver the orders, and the wages of the people working to prepare your order, prices are on the rise with the Covid pandemics only complicating matters.

The inflation in the US increased in September to 5.4%. All food ingredients rose, the largest  increase being in meats,  poultry,  fish, and eggs, which increased  10.5  percent  as  the price for beef  rose 17.6  percent  over  the year.  The smallest  increase  was dairy and  related products, whose  prices rose only 0.6  percent  over  the  last  12 months.  In the past 12 months the price of food away from home increased 4.7%.

But the latest rise in prices is fueled not only by commodities but also the lack of labor and an increase in wages. The US labor market is showing its incapacity to bring people back to work after the pandemic, 5 million people still missing from the workforce compared with 2019.

Rich Allison, Domino’s Pizza CEO, is considering that as the company worked its way out of COVID, it “saw more pronounced staffing challenges across the country, resulting in reduced operating hours and service challenges in a number of stores across the network. ” Domino’s (DPZ) missed its US sales targets in Q3, realizing -1.9% versus the expected 1.7%.This ends an impressive 41 quarters of US sales increases. But the comparable sales are up 15.6% compared with 2019 showing that it’s tough to beat a pandemic year where the stay at home consumer behavior changed. Net income was up 21.5% for Domino’s (DPZ) in Q3. The increase was primarily driven by higher income from operations resulting from higher global franchise revenues including the ones in Europe.

In Romania, according to INS (Institutul National de Statistica), on average the food prices increased in September 2021 with 4.26% year on year. Unemployment rate slowly rose to 5.2% in August from 5% in June, the minimum of the past 12 months, but we had a steep decrease in labor force participation from 69.5% of population in September 2020 to 66.3% in July this year. This is a trend that we have seen in the US and that has the potential to negatively impact economic growth.

Worries about increase in food prices are also raised in the UK, which, due to Covid and Brexit, faces an acute shortage of truckers, butchers and warehouse workers. “The days when you could feed a family of four with a 3 pound (RON 18) chicken are coming to an end,” said Ranjit Singh Boparan, owner of the 2 Sisters Group that produces a third of all the chicken consumed in the UK. He mentioned that in relative terms the chicken today is cheaper than it was 20 years ago but this will end due to labor shortages. “Less labor means less choice, core ranges, empty shelves and wage inflation, and this isn’t going to change,” he said. “Right now I need to be honest about what this means for the consumer as inflation could reach double digits.” The 2 Sisters company sells poultry, pizza and pies, processes 10.4 million birds a week and owns more than 700 farms.

Well it seems that the increase in food prices is a global event. But what about Netflix (NFLX)? There are analysts predicting that slowly, as content increases, the prices of subscriptions will increase too. We already saw this 1USD increase at the beginning of the year in the US, in Brazil last quarter and Singapore, yesterday. And Netflix doesn’t usually raise prices in a single geography. In the last quarter Netflix added a net 4.38 million global streaming subscribers – better than analyst expectations for 3.5 million. That total is up from a year-ago 2.2 million. It also met revenue expectations. Netflix said its performance has been boosted by the Korean-language program Squid Game, which attracted 142 million households during the first four weeks following its release on September 17, and new content is pouring . “We have so much content coming in Q4 2021 like we’ve never had, so we’ll have to feel our way through and it rolls into a great next year also”, said Netflix co-CEO Reed Hastings, showing little concern about the pandemic. According to Nielsen, In the broader TV and streaming market Netflix is dominating the US streaming sector with 6% of the total market share along with Youtube (GOOG) with the same 6%, Hulu 3%, Amazon Prime(AMZN) 2% and Disney + 1%. In Romania the only streaming services present are Netflix, Youtube and Amazon Prime Video.


Bogdan Maioreanu, eToro analyst and markets commentator, has over 20 years of experience in financial services and investments and a strong background in journalism. He held different Corporate Banking management positions in both Raiffeisen Bank and OTP Bank, before moving to business consultancy roles working for IBM Romania among others. Bogdan is an Executive MBA from Asebuss and Washington University.


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