Food prices take bigger bite

Concerned by the soaring costs of fuel and health care? Don't forget to add food prices to your worry list.

Food prices have been increasing steadily,  rising 6.5 percent since 2008 and 23 percent since 2003, according to a market-basket price survey conducted in Tolde, OH, at seven area grocery stores last week.

Totaling the average prices for the 15 items in the survey showed that the overall cost has risen to $35.07, up $2.14 since 2008 and $6.59 since 2003. The increases are driven largely by coffee, but some products have undergone limited price boosts, with accompanying decreases in package sizes.

But the news isn't all bad.

The average prices of eggs, whole milk, ground chuck beef, fresh whole chicken, bread, and Coca-Cola fell from 2008 levels, the survey found. Plus, grocery stores have worked to offer lower-cost alternatives or discounts on many sought-after items.

"Retailers offer a lot of way for customers to save money, and we have some customers who take advantage of all those ways, and they do save a lot of money," said Frank Guglielmi, a spokesman for Meijer Inc.

Nationwide, food prices as of June were up 3.7 percent from a year earlier, and they are up 6.2 percent since 2008, according to the food category of the federal government's consumer price index, said Christopher Hurt, a professor of agricultural economics at Purdue University.

"The one that as a sub-category is the highest is fats and oils. Cooking oil -- soybean oil is the most highly used cooking oil -- margarine, salad dressings, baking products, that's up 9.7 percent," Mr. Hurt said.

With the cost of sugar up 4 percent, bakery-goods costs are soaring, he said.

The only costs that are slowing are for fruits and vegetables, which are up 3.2 percent, he added.

In The Blade's marketbasket survey, Meijer finished with the lowest cost for the 15 items.

Four chains -- Giant Eagle, Kroger, Meijer, and Walmart -- were surveyed, as well as three area independents that each have two stores -- Walt Churchill's Market, Sautter's Five-Star, and Kazmaier's Five-Star.

The collective prices for the 15 items in the survey were lowest at Meijer and highest at Kazmaier's, but customer loyalty cards, discounts for multiple purchases, coupons, and other ways to save at each store were not counted. The prices used were the shelf prices, including any discounts available to any customer.

Stephen Breech, a grocery industry consultant in Columbus, said higher prices for food shouldn't be a surprise.

"The thing is, most of the supermarket guys have really cut out the fat that they could cut out of the business," Mr. Breech said.

Now grocers are at the point where they have to raise prices or go out of business, he explained. "And I think we're going to continue to see increases, and I say that because ...there were costs earlier this year, like fertilizer and fuel costs, that farmers had to pay to get the crops in the ground. Those won't show up until the crop gets picked and then put in the can."

Customers probably notice the soaring coffee prices -- up locally 69 percent since 2003 -- but there are "stealth price increases," products for which packaging looks the same but that contain less weight of the item, Mr. Breech said.

The marketbasket survey had two products with such price increases -- Folger's coffee and Oreo cookies.

Folger's container looks similar to those in past surveys, but the amount inside is now 11.3 ounces, compared with 13 ounces in the prior two surveys. Oreo's package size appears similar to those of past surveys, but content weight is now 16.6 ounces, compared with 18 ounces previously.

High crude-oil prices are affecting fuel prices, which raise food transportation costs. Oil prices affect fertilizer and farm-production costs, and because oil is a key ingredient in plastics, higher prices are pushing up food packaging costs, Mr. Hurt said.

Food prices probably will increase 4 percent in 2011, and predictions are for a 3 percent increase in 2012, he said.

But Mr. Hurt said many people won't necessarily pay those higher prices. The Bureau of Labor Statistics, which produces the consumer price index by measuring certain food and other prices, does not take into account discounts on food items, which most Americans now use.

Plus, food bills can be trimmed. "If you've been eating filet mignon, you can drop to sirloin, from sirloin to flank steak, from flank to hamburger," Mr. Hurt said. "These are the kind of things we do see families adjusting to," he said.

"When you eat out, you may be charged $2 for a soft drink. But most restaurants will give you a nice cup of ice water for free. I'm not advocating you pass up a soft drink if you really want one, but the point is you do have choices, and we do have a lot of choice in that grocery store now as well as that restaurant."

Mr. Breech said grocery chains have learned from Walmart in their wholesale buying strategies. "They really drive a harder bargain in their buying. They get suppliers tied up on long-term contracts," he said.

Coupon use is up dramatically, and retailers such as Kroger are controlling costs by creating their own dairies and bakeries to distribute products to their stores, he said.

Giant Eagle spokesman Dan Donovan said the Pittsburgh-based retailer, like everyone else, has been affected by rising commodity market prices.

But the retailer initiated a corporatewide strategy in 2004 to keep prices low through a loyalty card program, weekly specials, doubling the values of coupons, and store price reductions. The company estimates its customers have saved over $200 million on food since 2004 as a result.

Beth Wilkin, a spokesman for Kroger, said setting up dairies and bakeries and expanding its distribution network has helped the Cincinnati-based chain provide discounts through its customer loyalty card, electronic coupons, and weekly advertised specials. And its private-label products offer lower prices than national brands.

Mr. Guglielmi said Meijer has adopted a strategy of weekly sale items, but also a new program called "price drops" -- a specially negotiated deal with vendors that puts specific items on sale for about 30 days.

Many retailers use social media to keep customers aware of specials. Kroger, Meijer, and Giant Eagle have electronic discounts to download onto loyalty cards or other devices, and Walmart has electronic coupons to print out.

Sautter's, Kazmaier's, and Walt Churchill's each use Web sites and email to notify customers of weekly advertisements or specials.

Walt Churchill, owner of Walt Churchill's Markets, uses Facebook and Twitter, sending customers daily tweets about the store's latest food procurement and upcoming specials on food. "Personally, we try to not to have the gimmicks," he said of his store's pricing strategy.

Contact Jon Chavez at: [email protected] or 419-724-6128.

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