The Cost of Food
Analyzing the drivers of accelerated food prices in Denver and how they compare to the nation and other metro areas
Emerging from the aftermath of the COVID-19 pandemic, the U.S. experienced inflationary growth not observed since the early 1980s. One measure of inflation, the Consumer Price Index (CPI), grew by 9.0 percent nationally in June 2022 compared to the year prior and has remained relatively high through mid-2024 (while the 12-month change of 3.3 percent for May 2024 represents a vast improvement from 9.0 percent, it is still notably higher than the average annual growth rate of 2.1 percent between 1996 and 2020). According to the Bureau of Labor Statistics (BLS), the agency responsible for calculating the CPI every month, “the CPI represents all goods and services purchased for consumption…BLS has classified all expenditure items into more than 200 categories, arranged into eight major groups” (this Q&A section provides helpful information on CPI). Those eight major groups are: food and beverages; housing; apparel; transportation; medical care; recreation; education and communication; and other goods and services. In addition to producing CPI statistics for the U.S., the BLS also generates comparative data for nearly two dozen metro areas, including Denver-Aurora-Lakewood (unfortunately, neither state-level or rural estimates are available). The table below shows that of the eight major CPI groups, the food and beverages index has risen the fastest in Denver since May 2018, an increase of 28.9 percent. The consumption of food is a ubiquitous feature of everyday life, as it’s a necessary requirement for long-term survival. Therefore, changes in food price may be felt more acutely by individuals compared to most other goods and services. This article will explore the drivers of accelerated food costs in Denver and how they compare to the nation and other metro areas.
The BLS splits the food and beverages major group into two subgroups – food at home and food away from home. While self-explanatory, the BLS defines food at home as “the total expenditures for food at grocery stores (or other food stores) and food prepared by the consumer unit on trips” and food away from home as “includ[ing] all meals…at fast food, take-out, delivery, concession stands, buffet and cafeteria, at full-service restaurants, and at vending machines and mobile vendors” (the BLS also considers the inclusion of tips as part of food away from home). Beginning in November 2017, the BLS started publishing CPI statistics for the Denver-Aurora-Lakewood area on an every-other-month basis (January, March, May, July, September, and November), rather than the prior intervals of the first and second half of a given year. This shift in reporting frequency enabled an improved ability to measure price changes over time and to compare to other areas in a timely fashion. Since the most recent Denver CPI data produced is for May 2024, this analysis will primarily focus on trends from May 2018 to May 2024.
Between May 2018 and May 2024, Denver’s food away from home index grew by 42.7 percent, outpacing the 33.3 percent increase for the U.S. over that same period. Interestingly, as the chart below illustrates, the U.S. and Denver had similar gains in the food away from home index from May 2018 to early 2021 (aside from the highly volatile period in 2020 during the height of the pandemic); however, as the economy opened back up and in-person dining returned, growth in local prices accelerated compared to the nation. Recent increases in March and May 2024 have expanded the difference between the respective changes for Denver and the U.S. to the highest levels observed over the six-year snapshot.
There are 18 other metro areas within the contiguous U.S. that have consistent estimates of food away from home index data since 2018. The majority of these areas are on the same production cycle as Denver; although, there are several areas with an alternate cadence, meaning April 2024 is the most recent data available. The following table presents the percent change by year in the food away from home index for each area compared to either an April or May 2018 baseline. The increase of 42.7 percent between 2018 and 2024 for Denver-Aurora-Lakewood led all other metro areas. Boston-Cambridge-Newton, MA and Riverside-San Bernardino-Ontario, CA were the only other areas with changes of at least 40 percent during that period. San Diego-Carlsbad, CA had the slowest six-year growth, at just over 25 percent. Denver’s rate of change in 2022 and 2023 (23.4% and 34.3%, respectively) also ranked high, trailing just one other area in both years.
As the concept of percent changes in indices can admittedly come across as abstract, the next table attempts to convert that information into a more relatable form. Presented below is an illustrative representation of the change in price of a hypothetical food away from home item (for example, a meal at your favorite restaurant) between 2018 and 2024. A base cost of $12 was randomly chosen for 2018 and then the yearly percent changes in the above table were applied to that amount. For Denver, that $12 in May 2018 rises to $14.81 in May 2022 and then jumps further to $17.12 in May 2024. While a simplistic approach, this exercise can help contextualize these changes in food costs away from home.
Shifting to the food at home data presents a different comparative picture for Denver-Aurora-Lakewood when measured against food away from home. Between May 2018 and May 2024, Denver’s food at home index grew by 20.1 percent, lagging the national gain of 27.7 percent (granted, a growth rate of 20% over a six-year period is still historically high for this index, considering the increase between 2012 and 2018 was only 5%, based on annual data). As the chart below shows, Denver’s rate of change remained consistently slower than the U.S. over the past six years. However, both areas experienced rapid spikes in food at home prices from mid-2021 to late 2022, which coincided with the height of disruptions to the global supply chain. Over the past year and a half, growth in Denver’s food at home index has abated (notably, the May 2024 index level is actually lower than the May 2023 level), while the U.S. rate continues to rise, albeit at a slower rate.
Unlike food away from home, the BLS further breaks out food at home into various sub-categories. The following chart displays how a select group of those sub-category indices have changed over the past six years in Denver-Aurora-Lakewood. Prices in meats, poultry, fish, and eggs have clearly grown faster than the other sub-categories shown, with a rate of increase of just over 27 percent between May 2018 and May 2024. Cereals and bakery products (10.6%), fruits and vegetables (15.6%), and dairy and related products (17.1%) all had slower gains relative to the broader food at home group.
Repeating the metro area analysis and methodology from above, this next table presents the percent change by year in the food at home index for each area in contrast to either an April or May 2018 baseline. In a near reversal compared to the food away from home trends, Denver-Aurora-Lakewood’s increase of 20.1 percent in the food at home index from 2018 to 2024 ranked second to last. Tampa-St. Petersburg-Clearwater had the fastest rate at 35.8 percent, while surprisingly another Florida metro area, Miami-Fort Lauderdale-West Palm Beach, had the slowest gain at 20.0 percent. Out of 19 metro areas analyzed, only three were observed with higher six-year percent changes in their food at home index compared to food away from home: Philadelphia-Camden-Wilmington, San Diego-Carlsbad, and Tampa-St. Petersburg-Clearwater. Denver had the largest gap between the respective growth rates of the two broad food indices, a difference of nearly 23 percentage points (20.1% vs. 42.7%).
While the cost of food both at and away from home have experienced historically steep increases since the pandemic, prices for dining out have changed more drastically, particularly in Denver. This is likely driven by an unsurprising combination of food becoming more expensive (notably meat, poultry, fish, and eggs) and labor costs increasing within the food service industry. However, one possible silver lining is from data that indicates Coloradans continue to patronize food establishments at a frequency that mirrors or even exceeds pre-pandemic levels. According to statistics produced by the Colorado Department of Revenue, gross sales for food services and drinking places totaled $4.72 billion in Colorado through the first quarter of 2024. That amount represents a 4.7 percent increase from the same period a year prior and surpasses the expected level of sales based on a trendline analysis of similar activity from 2016 to 2019 (chart below). Another positive sign is the evidence that the increase in food costs at home have begun to slow, or even reverse in some cases. Hopefully that is a trend that continues for the rest of 2024 and into next year.