Groceries taking a bigger bite | Senator Eliot Shapleigh

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Groceries taking a bigger bite
April 3, 2008

Written by Sanford Nowlin, San Antonio Express-News

If it seems like you've been paying more at the supermarket, it's because you have.

And you may have to get used to it.

Higher fuel prices have pushed up food prices nationwide, forcing shoppers to reshuffle family budgets, rethink eating out and make thriftier grocery choices.

Hit with the worst food inflation since the 1970s, shoppers are dealing with sticker shock on everything from luxury foods such as steak and high-end baked goods to staples such as eggs and milk.

"We watch what we buy," said Georgina Morales, shopping Wednesday morning at La Fiesta grocery on Blanco Road. "We don't really go out, we look for sales, we pay more attention to what we make at home."

Morales, who spends $120 or more weekly to feed her family of six, said she recently began clipping coupons, something she's never done before.

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Her neighbor, Estrela Chantaca, said her husband has urged her to buy more generic brands. And she's been forced to reconsider the snacks she keeps around the house for her grandchildren.

"Now, I have to think about the price," Chantaca said as she rapped her knuckles against a package of juice boxes.

Food prices rose more than 4 percent in 2007, according to the U.S. Department of Agriculture. And they're expected to jump at least that much this year.

With energy prices high, it costs more to harvest food and bring it to market, economists said. Complicating the problem, farmers have cut wheat and soybean production to produce corn for ethanol, which pays hefty federal subsidies.

"As long as crude oil is at $97 a barrel or better, you're just not going to have cheap food," said Michael Swanson, senior economist for Wells Fargo & Co. "You can't produce it cheap, you can't transport it cheap, and you're going to have the value of ethanol bringing the prices up further."

While a few grocery items' prices are down — citrus fruits, for one — experts said most other items are on the rise.

A dozen grade-A large eggs cost an average of $2.17 nationwide, up 63 percent from two years ago, according to federal data. A loaf of white bread costs an average of $1.32, up 28 percent over that same period. And ground roast coffee is running $3.46 a pound, up 18 percent.

But grocers say the higher prices haven't necessarily kept customers away.

"Actual sales have gone up slightly and customer head count has gone up tremendously," said Ron Catlett, general manager of eight La Fiesta stores here. "The average sale per customer has gone down, but people are coming to the grocery store more and buying smaller quantities. That's telling me people are not eating out at restaurants as much."

H-E-B, San Antonio's dominant grocery chain, has seen a recent upswing in sales of its store-branded products, spokeswoman Dya Campos said.

However, the company also has taken steps to cut transportation costs. Among those are installing state-of-the-art routing software to shorten truck routes and using a modern trucking fleet so its trailers can haul bigger loads.

Economists predict high-end grocery stores could be hit hardest as consumers gravitate toward generic brands, cut out luxury food items or switch from organics to less expensive produce.

But almost every type of food retailer has been forced to pass along price increases, said Lorrie Griffith, editor of the Shelby Report of the Southwest, a grocery industry publication. Griffith said she's seen price increases at Wal-Mart Supercenters in northern Georgia.

"That indicates to me that it's probably happening everywhere, given Wal-Mart's buying power," she said. "However, most grocers are trying to hold the line on price increases as much as they can."

Restaurant operators also said their food costs are rising, but worry whether they can boost prices as they struggle to hang onto customers.

"We operate pretty tight already, so I don't think we have much of a choice but to raise some prices," said Cappy Lawton, owner of San Antonio restaurants Cappy's and La Fonda on Main. "But we're also in the middle of an economic slowdown right now, so you have to be careful."

While middle-class and wealthy Americans likely will cut back on restaurant meals and entertainment to make up for rising food costs, those on low incomes or fixed incomes won't have that option.

Many already are struggling to keep up with rising fuel and health-care costs, economists said, and those on public assistance will find food stamps don't buy as much.

"People with lower incomes tend to spend a larger percentage on food, and they don't have as much flexibility to cut elsewhere when those costs go up," USDA economist Ephraim Leibtag said.

America's Second Harvest, which distributes groceries to food banks nationwide, said it's seen a 30 percent year-over-year increase in people seeking assistance at the food pantries it services. That's come at the same time that the group is dealing with a substantial drop in donations from the USDA.

"We're seeing people all over the country coming in for food assistance for the first time," said Maura Daly, vice president for governmental affairs.

Back at La Fiesta, retiree Arturo Hernandez said he and his wife now split their grocery shopping between multiple stores to make the money go further. He was buying beef and avocados on this shopping trip, but recently purchased eggs at Wal-Mart and milk at Walgreens because they were less expensive.

"The way things are right now, you've just got to look around for the lowest prices," he said. "If we can find something that's cheaper, we'll buy it there and keep it in the refrigerator. These prices are hurting everybody."

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