If rising food prices are giving you pause at the grocery store, know that you are not alone. The supermarket industry is concerned, too.
Supermarkets are beginning to push back against food companies that keep increasing their prices, according to a Wall Street Journal story headlined, “Grocers Find Food Prices Hard to Swallow.” Dealing with rising costs is one thing, but when Kraft and Kellogg reported higher-than-expected quarterly increases in earnings recently,companies like Food Lion took notice.
Consumers who felt like suckers when gasoline was $4 a gallon and oil companies were reporting record profits should be uneasy at the prospect of food companies ó not the grocery stores, themselves, but the food suppliers ó raising profits at recession-stricken families’ expense.
Prices for all food purchased in this country rose faster in 2006 and 2007 than at any time since 1990, according to the U.S. Department of Agriculture. Including grocery shopping and restaurant trips, U.S. food prices rose 2.4 percent in 2006 and 4 percent in 2007. The percentage of income families spend on food was still under 10 percent in that period, but you have to wonder if 2008 statistics will tell a different story.
Families are taking big hits when they go to buy the basics. In 2007, the retail price of milk rose 11.6 percent, and egg prices jumped 29.2 percent, the USDA reports. Vegetable oil and bread prices are headed up 9 percent or more this year.
Meanwhile, Food Lion’s parent company, Delhaize, reported an increase in U.S. same-store sales of only 2.5 percent in the third quarter, compared to 4.6 percent in last year’s third quarter. Shoppers are shifting to less expensive purchases, including more store-brand items.
In the land of amber waves of grain, food commands a relatively small portion of family budgets on average. Between 1970 and 2005, the percentage of disposable income spent on all food fell from 13.9 percent to 9.8 percent ó not because food prices fell but because prices on other consumer goods rose faster than food prices.
But families at the lower end of the income ladder are not so lucky. Those making $10,000 to $14,999 a year spend about 25 percent of their income on food, while the $15,000 -$19,000 income families have it a little better; they’re spending “only” 19 percent of their before-tax income on food. Hence the lines at places like Rowan Helping Ministries, the Salvation Army and elsewhere. Providing food, shelter and clothes for a family on a low income has always been a struggle; the recession and rising prices have made it nearly impossible.
Cash-strapped consumers deal with rising prices the only way they can, by buying less. Now supermarkets are pushing back too, advocating for themselves and their customers. Food prices cannot continue their steep climb.