Manufactured vs. Real Inflation: AI-Driven Solutions for Food & Beverage Pricing

As of February 2025, food prices rose by 2.6% compared to the same month in 2024, marking the highest rate in over a year. Grocery-store purchases went up by 1.9%, while restaurant meals increased by 3.7%. Egg prices skyrocketed by over 50% in January 2025 due to supply chain issues, and beef could climb another 1.5% this year. These shifts define food industry inflation in 2025. Yet not all price spikes come from real supply pressures.

Many brands face a mix of genuine inflation and manufactured dish price inflation that stems from fees or strategic markups. Below, we examine how real and artificial cost increases affect decision-makers in CPG, foodservice, and retail—and how an AI-driven pricing strategy can reduce risk.

Manufactured vs. Real Inflation

Supply chain setbacks—bird flu, shipping constraints, and global import tariffs—can push protein, produce, and packaged goods upward. This is authentic inflation, where rising costs for feed, labor, or transportation drive final prices. Meanwhile, manufactured dish price inflation often appears through delivery fees or platform markups.

Manufactured vs. Real Inflation happens when delivery fees or platform costs lead to inflated menu prices that don’t reflect true ingredient costs. This creates confusion in the market and can shift consumer behavior unnecessarily.

For example, a restaurant might increase its burger price to cover third-party charges, leaving customers to assume the inflation is universal. The gap between actual supply costs and what ends up on a menu can distort consumer perceptions.

The cost of convenience in delivery & beyond

Delivery platforms have become integral for restaurants, but service fees quickly chip into margins. Operators either absorb these costs or raise prices—passing the bill to consumers. That practice may be confused with food industry inflation, yet it’s not always tied to raw ingredients. Brands working with restaurant partners see how “convenience” can be a hidden cause of rising menu prices. Those fees can frustrate diners, hurting loyalty over time.

How shoppers respond to rising costs

The ‘trade-down’ phenomenon

When real or perceived prices climb, consumers often pick cheaper protein sources or less premium items. According to the Tastewise At the Table: Eating Through Inflation survey, more than two million people reported buying fewer specialty goods, opting instead for standard or store-brand items. This consumer behavior shift affects product mix, brand loyalty, and average basket size.

Coping with ‘sticker shock’

Nobody wants to feel overcharged. Shoppers facing menu increases may cut back on extras or dine out less. Quick-service restaurants offering “value” dishes can pick up traffic. At the same time, food manufacturers may lean on smaller package sizes or simpler product lines to keep prices stable. Adapting recipes or portion sizes can temper consumer behavior shifts that reduce overall spend.

Brand & retail strategies for navigating volatility

CPG companies and retailers grapple with thin margins. Pushing prices too high risks driving shoppers away. Holding prices steady can reduce profits. A middle ground involves strategic promotions or loyalty programs that ease “sticker shock.” Timely decisions come from data: real-time restaurant menu benchmarking can show how chicken dishes, for example, are priced across the market. Brands then know if a one-dollar jump keeps pace with other offerings, without driving away loyal buyers.

Turning challenges into opportunities

When direct costs creep upward, creative substitutions and flexible product lines help manage budgets. For instance, swapping out expensive proteins with less volatile options can retain customer interest and profitability. Some operators might shift marketing around budget-friendly bundles, pairing top sellers with high-margin add-ons. Data from CPG pricing strategies show how manufacturers and retailers can maintain price points consumers accept—while staying profitable in tough conditions. For more on how to use this kind of pricing intelligence, see how others are staying competitive.

How AI tools drive smarter pricing decisions

Real-time benchmarking & market insights

Modern tools show how restaurants, grocery chains, and e-commerce platforms handle food industry inflation. An AI-driven pricing strategy can filter through massive data sets to produce insights about shifts in price points, product availability, and local competition. Restaurant menu benchmarking at scale becomes possible, so brands see if they’re exceeding market averages. This stops overpricing that might push consumers to rivals and underpricing that leaves money on the table.

Predictive modeling for agile adjustments

Advanced algorithms assess how cost drivers—like feed prices for poultry or freight rates—might rise or fall in upcoming quarters. That foresight helps retailers decide if a small price bump now is better than a steep hike later. By studying manufactured dish price inflation signals from delivery markups, AI models can also identify channels prone to abrupt changes. This approach means flexible planning for promotions, product sizes, and ingredient sourcing.

When costs rise with little warning, operators often pivot menus. Customizable dishes—like a Grilled Chicken Grain Bowl—provide a valuable format. They allow managers to use more affordable proteins or seasonal vegetables, all without sacrificing appeal. This recipe shows how to protect margins by adjusting toppings, grains, or sauces based on fluctuating ingredient prices.

FAQs

How do we distinguish between real inflation and ‘manufactured’ price hikes?

Manufactured vs. Real Inflation is a crucial distinction. Real inflation stems from input costs—fluctuating grain prices, bird flu outbreaks, and logistical disruptions. Manufactured dish price inflation relates to platform fees, strategic markups, or extra service charges added to a product. Both add pressure to pricing, but the root causes differ.

Can AI prevent consumer backlash when prices must go up?

Yes. An AI-driven pricing strategy draws on current market intelligence, scanning average menu prices across channels. If you raise costs at the right time and by the right amount, you reduce sticker shock. The result is a balanced approach that protects profit while preserving trust.

What are the quickest ways to mitigate cost spikes without sacrificing innovation?

First, stay informed about real-time market data—restaurant menu benchmarking helps identify where prices stand. Next, consider flexible product lines that swap high-cost items with affordable alternatives. Finally, use data to plan promotions that soften higher costs for value-conscious shoppers.