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GROCERS WORRIED ABOUT RISING FOOD PRICES IN A CRASHING ECONOMY |
| (02/05/2009) |
| Last year when the cost of commodities such as wheat, oil, and corn was soaring, grocers grudgingly accepted price increases from Kellogg, General Mills, H.J. Heinz and other food manufacturers. Added to the problem, was the high cost of gasoline to deliver food to local markets. Those price tags never came back down, even when commodity prices collapsed in the fourth quarter of 2008 and gasoline prices dropped. Retail grocers have little relief to offer at a time of deepening economic gloom. In fact, most shoppers in rural West Virginia are reporting that retail prices on many items continue to increase. "The prices don't seem to go down as fast as they go up," says Jeffrey Noddle, CEO of Minneapolis-based Supervalu, one of the nation's leading grocers. Grocers are demanding action in these severe economic times. Market analysts are expecting a "battleground" over the next six months as grocers pressure manufacturers to adjust their prices. And if they refuse? "In almost every category," notes Noddle, "you have other vendors to look to." In January, Kellogg raised its prices on Frosted Flakes, Cocoa Krispies and most of its other cereal brands. Grain-based products have been hard hit by the Bush administrations decision to support the use of US corn for ethanol to fuel automobiles. Critics said it is one of the worst programs pushed by the Bush administration. Safeway, a 1,700-store chain based in Pleasanton, California, says it will "encourage" its vendor partners to help pass savings along to shoppers. Many grocers are looking at increasing the use of private-label or "store-brand" goods to reduce costs. The one thing that's guaranteed to do the trick is a continuing crash in commodities.
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