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Taking a hit in the gut: As food prices rise, shoppers change their buying habits: Chicken every night for dinner(News & Observer, The (Raleigh, NC) (KRT) Via Thomson Dialog NewsEdge) Jul. 15--Milk is $4 a gallon. Cereal is $4 a box. And an orange for your lunchbox can run $1.50 or more. Food prices are rising faster than they have in 17 years, and there's no relief in sight. Economists had expected a 4 percent increase this year -- we reached that in May. No one is predicting prices that will make you hit the panic button. But when you add the higher grocery bill to everything else that costs more -- gas, utilities and medical care -- it's an unwelcome change for most families. To compensate, many consumers are making changes: buying more generic products, switching to cheaper meats or simply cutting out some of the extras they normally buy. Shopping smart Wake Forest resident Margie Kishpaugh is caring for her three children and three others she is watching for friends this summer. The six children go through a gallon of milk a day. Kishpaugh has found ways to stretch her already-tight budget. She uses coupons, buys items on sale and stocks up on products when they are cheap. "The last time it was on sale at Lowes [Foods], I must have bought at least 20 packages of chicken breasts," she said. "We eat chicken almost every day." Chicken prices have risen, too, along with prices on everything from eggs to steaks. Several factors are boosting costs. Blame bad weather in Florida for higher produce prices and blame higher oil and gas prices for just about everything else. It takes energy to get food to the table, from fertilizing it to harvesting, packaging and transporting it. Manufacturers are passing those increases on to consumers. Higher oil prices have had another consequence: There's a national push to boost production of ethanol, which is made from corn, as an alternative fuel. That in turn has increased the demand for corn and led to higher prices. The price of a bushel of corn nearly doubled -- to $4 -- from late 2005 to early 2007. Those increases have hit farmers who use corn as feed, cereal manufacturers and even soda makers (corn syrup is used as a sweetener). There could be some relief on that front, at least. At the end of June, the U.S. Department of Agriculture reported that the nation's farmers dedicated more acres than expected to growing corn -- something that will help alleviate some of the pressure on the corn market. However, that announcement had a negative side: More acres for corn means fewer acres of soybeans, wheat and other crops. If that's too big-picture for you, just take a look at the price of a box of cereal. At first, manufacturers and retailers seemed to be absorbing the higher cost of corn and gas, but they were really just working through their inventory of already-made product, said Brian Todd, president of the Food Institute, a New Jersey group that studies food prices. Cereal "has a longer shelf life, so it takes longer to filter through," he said. Now a box of cereal can easily cost $4. At the end of June, cereal maker General Mills debuted new boxes for Cheerios, Chex and Wheaties. The prices are slightly lower, but the boxes shrank and the price per ounce went higher. General Mills spokeswoman Kirstie Foster would not say specifically how much the prices increased, saying only that the percentage increase per ounce was "a low single-digit increase." Foster said the company is responding to market conditions and competitors. "Most of our competitors have already increased prices," she said. A little perspective Such changes might seem abrupt because so many products are affected. But historically it's not that bad, Todd said. The last time the price of groceries went up more than 4 percent was 1990, when they rose 6.5 percent. But prices jumped as much as 16.4 percent in 1973 and 14.9 percent in 1974 when gas was in short supply. That's little comfort for shoppers who have come to depend on low prices. Many are moving toward discounters and warehouse clubs to save pennies. John Taylor of Raleigh is retired and has three children in college. When he noticed that prices were on the rise, he started shopping more at Costco, the warehouse membership club that sells in bulk. "I've always been a little careful with money," Taylor said. "But I'm more aware now." So now he buys ground beef instead of steak, and chuck instead of sirloin. He has also eliminated extras such as eating out and going to the movies. That kind of consumer behavior is hurting movie theaters, restaurants and other businesses. In a survey released in May that focused on the effect of higher gas prices, consumers told the Food Marketing Institute that they were changing their behaviors. Sixty-nine percent said they are eating out less often, and 65 percent said they were purchasing fewer luxury items, institute spokesman Bill Greer said. "Even high-income shoppers are giving that response as well," he said. "So it's cutting across income levels." Customers at 518 West in Raleigh's Glenwood South district have been choosing cheaper menu items, said general manager and executive chef Blaine Nierman. The restaurant is preparing to print a new menu, and some "small plate" specials that it has been testing will become permanent options. Nierman also has seen food prices rise. Lemons have gone from about $16 a case to $32. Chicken has more than doubled in the past six months. And cream has gone from $22 to $30 a case. So far, those added costs have not resulted in higher menu prices. "You can't pass every cost on to the consumer, especially in this business," Nierman said. "We're trying to do other things, like run our business a little smarter, turn off our air conditioner at night, watch our labor costs." Grocery stores have not missed the fact that many consumers are feeling pinched. Many are offering specials to attract shoppers. Last week, Harris Teeter offered shoppers two boxes of General Mills cereals free if they purchased two. Food Lion has the same deal this week and is in the middle of a promotion in which customers can get a free gallon of milk after purchasing six. Still, building customer loyalty is difficult as more shoppers begin to shop like Dave Hilliard of Raleigh. Hilliard combs the sales circulars every Wednesday morning and typically shops at least three grocery stores a week, looking for the best deals. "I used to go to the grocery store and grab what I wanted and go pay for it," he said. "Now I just wait till they have it on sale." The price increases might not be permanent, said Jon Fisher, who tracks food companies for Fifth Third Bank, a Cincinnati commercial and investment bank. "Everything has a cycle," he said. "The '80s was a decade of pretty strong pricing, and then the '90s was not. ... We're still in the early part of that cycle, but over the next 30 years, we'll see the top of this cycle and the bottom of a new one." Even with experts predicting that prices will come back down eventually, many shoppers have their doubts. "A lot of things have to change," Taylor said. Staff writer Sue Stock can be reached at 829-4649 or [email protected]. To see more of The News & Observer, or to subscribe to the newspaper, go to http://www.newsobserver.com. Copyright (c) 2007, The News & Observer, Raleigh, N.C. Distributed by McClatchy-Tribune Information Services. For reprints, email [email protected], call 800-374-7985 or 847-635-6550, send a fax to 847-635-6968, or write to The Permissions Group Inc., 1247 Milwaukee Ave., Suite 303, Glenview, IL 60025, USA. |