GROCERY STORES FIGHTING HIGH FOOD PRICES

(11/03/2008)

The Wall Street Journal says the days of rapidly rising grocery prices might be nearing an end, as supermarkets push back against food companies that are reporting profit increases. Kraft Foods Inc. and Kellogg Co. reported higher-than-expected quarterly earnings Wednesday, thanks mostly to price hikes. Government statistics tend to announce small percentage increases in food costs, while many consumers say most products have gone up between 15-60%. Much of the problem, according to producers, is linked to the US government program to use corn for ethanol production, although energy experts say the measure has little impact on gasoline availability. The Wall Street Journal says retailers are using food companies' earnings reports as leverage to reject price increases. Retailers are reporting sluggish sales, indicating consumers have become selective and price conscious. Kraft's revenue rose 19 percent from the year-earlier period, and Kellogg's sales climbed 9.5 percent. Kraft Chief Executive Irene Rosenfeld said "As we look ahead, we're assuming our margin growth will come from volume growth and higher-margin products in the portfolio and not pricing." U.S. retail grocery-store prices rose about 8 percent in September. Although grain and soybean prices have fallen by about 50 percent from their summer highs, there has been little reflection in food prices.

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