How grocers will need to adjust in a year of record egg prices

The egg shortage has grocers in a precarious position. Thus far, many have reacted to soaring egg prices by passing cost increases through to their customers, but that may not be a viable option much longer. With prices already at record levels and the USDA predicting that egg prices will rise more than 40% this year, grocers need a different plan.

While early March reports look less dire than updates issued in February, a return of egg prices to normal remains far from certain — and their outsize impact on consumer price perception remains a significant factor for grocers to manage.

We recommend every organization start with three actions: 

• Revisit the role of the category and adjust pricing strategy as needed; 
• Decide on contingency plans for disruptive competitive action; and 
• Map out potential downstream impacts of the shortage. 

Revisit the role of the category

While preserving margin percentage can be a worthy goal in normal circumstances, maintaining margin dollars may be a more realistic target if egg prices continue to climb as expected. As a top-tier KVI, eggs play an outsize role in price perception, and with traditional grocery already in heavy competition with price-first channels like mass merchandise, discount and club, supermarkets need to take care that they don’t alienate customers with an eye-popping number on an every-trip item. 

In the current economic environment, with 75% of shoppers having already adjusted how they shop due to financial pressure, grocers that make the wrong decision on how to price eggs face a real risk of losing market share.

To help determine the extent of any pricing adjustment needed, grocers should keep a close eye on how their egg unit sales and their overall average basket size have trended as egg prices have gone up. Analyzing traffic patterns is another angle from which to assess whether egg prices are causing customers to switch to competitors. 

While it’s ideal to strike a balance between maintaining traffic and maximizing margin, eggs are too critical an item to prioritize the latter at the expense of the former. 

Decide on contingency plans for competitive action

Along with studying sales, basket size and traffic trends, grocers also need to be monitoring their competitive price index to make sure their egg prices are in line with nearby peers. 

If the shortage continues, it wouldn’t be surprising to see a large-scale national retailer become much more aggressive with pricing, even going so far as to sell eggs at cost. Since their cost is considerably lower due to discounts for the huge volumes they buy, there would be little that traditional grocers could do to compete on eggs specifically.

Grocers can prepare for this scenario by studying their top 10 KVIs and considering which pricing moves on other items would be most powerful in response. Grocers would need to look at the essential items on which they’re most competitive and double down. 

With many shoppers still experiencing reduced buying power due to years of high inflation — and now with the egg shortage — 2025 may well be a year where price investments have to be a top priority. The need to invest in lower prices may become even more acute if new tariffs on goods from China, Mexico and Canada drive up costs for suppliers.

Map out potential downstream impacts of the shortage

Once grocers have clarified the role of the egg category and adjusted their pricing strategy accordingly — and once they have planned for worst-case market pricing scenarios — they also need to consider potential indirect impacts of rising egg prices.

The role of eggs in the prepared foods program could be one such area. Grocers may need to make decisions on whether to adjust recipes, pricing, assortment and more.

Performing basket analysis to look for sales trends in any items frequently purchased with eggs is another opportunity for grocers. Categories in which eggs play a central role, like breakfast and baking, could potentially see shifts eventually if prices go high enough.

Examining ingredient lists of CPG products and keeping in close communication with suppliers on expected cost increases due to the egg shortage will help retailers forecast on which other items to expect inflation later on this year.

Looking ahead

The federal government has pledged up to $1 billion toward mitigating the devastating bird flu that has been decimating flocks since 2022, but even their estimate is that it will take 3-6 months for the egg market to stabilize. Even if costs don’t continue to rise, it would hardly be shocking to see them remain elevated for the balance of the year, if not longer. 

To this point, most grocers have been reactive rather than proactive on the pricing of eggs, passing through cost increases, halting ads, and limiting purchase amounts. To come through this crisis with their market share intact, grocers will need to make intentional shifts that prioritize long-term relationships with customers over short-term profit goals.