Since Labor Day, the supermarket where I regularly shop has added a nickel, a dime, or a quarter to just about every item I buy: whole chickens, skim milk, mozzarella, lettuce…
Have you noticed? Side items, too, cost more: salad dressing, dried pasta, canned goods–the can of black olives that cost 85-cents all summer is suddenly $1.22.
For a can of olives?
I asked the checker if the price increases meant she just got a raise.
She got a good laugh out at that.
The Labor Department this week confirmed my observations. The Consumer Price Index rose 0.3 percent in September. However, take food and gasoline out of the equation, the so-called core prices increased 0.1 percent. That’s the smallest rise since March.
So why are food prices rising?
Considering so many people are having a tough time making ends meet, is it good business, is it right that food retailers are moving the ends?
When NPR reported the price spike at food retailers, it pointed out the bad timing. “…Americans are facing higher food and gas prices at a difficult time. Unemployment has been roughly 9 percent for more than two years. Hiring is slow and few people are seeing much in the way of raises. Steeper prices for basic necessities have forced many to cut back on more discretionary purchases. That has slowed overall growth.”
AHA! An opportunity to offer my Fudge Pop Philosophy:
Let’s say you make and sell fudge pops. It cost you 50 cents to make each fudge pop (labor and packaging included). You sell them for a dollar. You sell 100 a day. Grand total profits–$50. Along comes hard times and ten people just laid off decide they can’t have their daily fudge pop.
So what do you do?
- A) Raise the price a nickel to maintain your current profit margin at the risk of losing additional customers?
- B) Lower the price a nickel to retrieve your lost customers and, who knows, maybe attract new customers (who just saw the price of your competitor’s orange pops go up a dime).
The Grocery chains appear to have chosen to go with A.
SuperValu, which owns Albertson’s, reported $60 million profit in the second quarter (it had a dismal 2010). Kroger, the nation’s largest grocer, earned $432 million in the first quarter of 2011, up 16 percent from a year ago. The company credits “cost controls and a rise in sales.”
I don’t expect food retailers to lose money (I probably own shares of one or more of the chains in my mutual fund). But in a recession, during hard times, come on. Be satisfied with smaller profits, any profits.
Alas, there may not be a lot you and I can do. Unlike banks imposing new fees, we can’t boycott grocery stores. They know we’ve got to eat sometime. But we can pass on the most outrageously priced items. I saw one brand of tub margarine at nearly $5– I’ll eat my toast dry before I pay that much for something that’s probably not good for me anyway.
The upside to all this is that Social Security benefits are tied to the CPI Index, so 55 million Americans get a cost-of-living adjustment on their monthly checks.
Just don’t spend it all in one place. But chances are you will, if you have to eat.