The cost of doing business - Grocery Stores

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We are getting hammered from both ends. From the L.A. Times:
Grocers, name-brand food producers at odds over prices
There's a tug-of-war underway over food prices between the nation's supermarkets and giant food manufacturers including Nestle, Unilever and Kellogg.

The nation's big grocery chains contend that food manufacturers have raised prices too fast and too far, considering large drops in prices for fuel, corn, wheat and other important commodities in recent months.

The food companies disagree and say they are still coping with many rising prices themselves.

At issue are surging wholesale prices for products such as Nestle's Dreyer's Grand Ice Cream, which rose 14% last April. Since then, the price that farmers get for milk -- the main ingredient -- has dropped 36%.

Kraft raised the wholesale price of a box of its staple macaroni and cheese an average of 9% in the last year, according to several supermarket chains, despite 38% to 68% plunges in cheese and wheat prices. These increases factor in the growing practice by the manufacturers of shrinking the weight of the contents without reducing wholesale prices.

The grocers are fuming. One large grocery company operating in Southern California has seen the wholesale price for a carton of Kellogg's Corn Pops rise about 17% since June -- despite a 52% plunge in corn prices from their peak that month.
What is happening is that a lot of third-party manufacturers are making their own brands and reflecting the true costs of materials. From the article:
Dills recently took advantage of a Stater Bros. special on two house-brand 30-ounce, self-rising pizzas for $7.

"They are the same quality as the Freschetta or DiGiorno brands that sell for $5.99 each," Dills said.
Kroger, the nation's largest grocer, operates 41 manufacturing plants, including 16 dairies, seven bakeries, five grocery plants, three beverage plants, three ice cream plants, three meat plants, two cheese plants and two frozen dough plants.

Corporate, or house, brands now account for 27% of Kroger's grocery sales and 34% of the units, or individual items, sold, said Dave Dillon, the company's chief executive.
Our own store is getting hit with not only price increases but our wholesalers are charging a blanket fuel surcharge on each delivery.

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This page contains a single entry by DaveH published on March 8, 2009 5:18 PM.

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