Inflation Is Coming for Tofu Next as Americans Pay Up for Protein
(Bloomberg) -- Tofu is about to get pricey, and it’s going to test just how much Americans are willing to pay for protein.
Americans on a health kick have been actively eating more protein in recent years, but costs for all the major sources of it are soaring. Beef, pork and chicken prices are increasing as demand picks up in the post-pandemic economy. The same is happening with plant-based burgers and other imitation meats.
Now, tofu, one of the cheapest options, is next.
Bean curd is getting more expensive because of some unusual market dynamics that have livestock gobbling up soybeans meant for humans. That ultimately means there’s less supply for tofu makers. At the same time, there’s a renaissance in consumption. Americans are saying they’re finally comfortable eating out after a year of Covid-19 lockdowns, and that’s spurring demand for tofu at Asian eateries and fast-casual chains where it’s a popular dish.
It all points to higher prices on the horizon. Higher tofu and plant-based meat prices are leaving people with fewer options when it comes to nutritious protein, said Esmee Williams, vice president of consumer and brand strategy at Meredith Corp., which owns the website Allrecipes.
“There’s just no way to avoid the cost,” she said.
More expensive tofu is adding pressure on shoppers already grappling with larger grocery bills. Global food prices have rallied to their highest in almost a decade, according to a United Nations gauge.
Soybeans, the main ingredient in tofu, are in the midst of an epic supply crunch. China is transitioning its hog industry, the biggest in the world, from mostly backyard operations where animals were fed dinner scraps to industrialized farms where they’re fed corn and soybeans.
As a result, the Asian nation has been scouring world markets for feed grains and depleting inventories. Grain and oilseed futures have touched multiyear highs. The purchasing spree is causing soybeans fed to animals to surge even above higher grade beans that go into human foods.
American organic soy grown for animals costs $27 a bushel in the U.S. compared to $23 for the human sort, according to Chicago-based research firm Mercaris. Now growers are selling beans normally destined for human products into livestock channels, said Dan Martinek, general manager at Midwest Organic Farmers Cooperative, which helps growers find buyers for their crop.
Soybean purchasers “are sitting here with sticker shock just because the price is up at least a third compared to what they’re traditionally used to buying,” Martinek said.
That’s putting pressure on restaurants like Xi’an Famous Foods, a fast-casual New York chain serving fare from China’s northwestern region. Billed as a “cheap eat,” its costs for everything from lamb to pork have risen recently, as well as for the soybeans it grinds to make the curd that goes into its spicy tofu dish. The company has already increased prices, but doesn’t see the trend of higher costs stopping anytime soon.
"It will put us at a bit of a squeeze," said chief executive officer Jason Wang.
Americans are eating more bean curd than ever. Tofu shipped to restaurants nearly doubled in April from a year ago, according to data from The NPD Group. Sales at grocery stores are also staying elevated after getting a boost during the pandemic, jumping 8% to $370.5 million in the year through May 1, NielsenIQ data show.
Prices are already up. Unseasoned tofu -- the white squishy block that needs cooking -- as well as ready-to-eat flavored products have risen more than 8% in the past two years, according consumer research firm Spins LLC. Prices may increase as much as another 4% in 2021 and 2022, according to Minh Tsai, chief executive officer at Oakland-based producer Hodo Foods.
Tofu lovers won’t see the full effects of the soy shortages on prices right away because retailers don’t immediately pass on higher costs, and manufacturers secure much of their supplies in advance using forward contracts.
House Foods Group Inc., a maker of tofu based in Osaka, Japan, expects elevated soybean prices to continue for some time. The company is trying to absorb cost increases.
“However, we cannot rule out the possibility of a price increase,” said Masahiko Isobe, a marketing division manager at the firm.
Still, tofu’s competitors are surging to even loftier prices. Fresh meat at grocery stores have jumped 8.3% in the year through May 1, and faux meats rose 3.3%, according to NielsenIQ. Soy protein is a common ingredient in meat alternatives.
“Tofu will remain much more economical relative to other plant-based foods,” Hodo Foods’ Tsai said. “And to meat, for sure.”
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