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Grocery gap growing as Walmart, Target hold prices

TAMPA - As shoppers do all they can to save at the grocery store, there's a growing gap between two kinds of stores: National chains that generally keep prices stable week-to-week and regional stores that run sporadic sales. Inflation in food prices is putting that different into stark contrast, as picking the right store can mean saving or losing 25 percent on a $80 grocery run. In the last two years, Walmart and Target have managed to limit food price inflation to less than 10 percent – no small feat considering the skyrocketing cost of foods like butter, bacon, eggs, coffee and milk. By contrast, regional Florida stores like Publix and Sweetbay have raised prices dramatically, according to two years worth of prices collected by the Tribune on 30 typical grocery items.
Winn-Dixie normally is the most expensive store for a basket of items, followed in order by Publix, Sweetbay, Target and Walmart. Nearly all food items have risen in price in recent weeks, and there is only a hint of silver lining in the future, according to food economists. "The rate of food price inflation will slow down," said Ricky Volpe, an economist for the U.S. Department of Agriculture. "We're not looking for prices to turn around and go lower. But the rate of increase will slow down and approach a more historically normal rate." That will come after one wild ride. Food prices really shot up in 2007, Volpe said, but fell rapidly in 2009 amid the first economic downturn. So producers including corn farmers and cattle ranchers cut back production. Then, everything cut loose. Energy costs rose, farmers diverted grains like corn to biofuel production, and demand for better foods started rising quickly in China and Southeast Asia, Volpe said. Combined with a relatively weaker U.S. dollar, and slimmer production in the United States, Volpe predicts food prices to rise 3.5 percent to 4.5 percent in 2011, with the biggest spikes in foods that use a lot of commodities, like milk, beef, poultry and bacon.   * * * * *   Just how stores have handled those prices varies widely. Rather than run periodic sales, Walmart has stuck to its "Every Day Low Prices" philosophy, and many of the 30 Market Basket items there almost never change in price week to week. Looking over two years of data, Walmart had the lowest average price for 17 of the 30 items measured — staples like butter, eggs, Pepsi, bread, Ragu pasta sauce and Starkist tuna. Robert Murphy said he switched from Publix to Walmart to save money. "I work in the produce industry, and I can see the quality is much better at Publix, but they are just so expensive," Murphy said. "Nowadays, it's all about the money. You have to do everything you can." Target has a consistent-price strategy similar to Walmart's, and recorded the lowest price for 10 of 30 items surveyed, including Cheerios, Oreos, lettuce, Jif peanut butter, sugar and Wesson oil. Sweetbay, by contrast, lifted prices 15 percent in the last 12 months on Market Basket items, 20 percent in the last two years. One counterpoint: A new line of "My Essentials" store-brand items that Sweetbay officials pledge will be the lowest-priced in the market. Sweetbay may have higher prices on produce, said Sweetbay shopper Mareesa Seabring, "but the quality is really nice. And Walmart doesn't always have those unusual things I need sometimes. "If there's a specific kind of pepper, Sweetbay will have it." Publix saw its Market Basket total rise 11 percent in the last 12 months, and upwards of 25 percent over two years. Averaging each item across two years of data, Publix had no item at the lowest price among major grocery stores surveyed. Publix officials say their own surveys show prices across the entire store have risen at just one-third the rate the Tribune found with specific Market Basket items. "We have been successful in delaying some cost increases, reducing the amount of some increases and working with our suppliers to create more weekly specials," said spokeswoman Shannon Patten. Publix is also increasing the number of its signature Buy-One/Get-One free deals on specific items, Patten said. Combined with a coupon, she said, BOGO deals offer shoppers significant savings.   * * * * *   Whether BOGOs save shoppers money in the long run is difficult to measure. If a two-liter of Pepsi is regularly $1.50, and a BOGO deal comes along, is the real price $75 cents apiece? Or does that merely distort how much Publix charges for Pepsi every other week? Is the price of Pepsi rising or falling, then? "That question is a source of consternation among Ph.D.-level economic researchers," said Volpe, at the USDA, which tries to measure how much food prices change month to month. Looking at stores like Publix, food prices would seem to swing wildly every week. Meanwhile, Winn-Dixie and Sweetbay have been adding more BOGO deals of their own. "There is no right answer," Volpe said. Either way, Lakeland-based Publix is doing well as a company. Sales at its 1,039 stores across the Southeast grew by 5.8 percent in the second quarter of this year to $6.6 billion, and profits grew even faster, up 9.7 percent to $382.4 million. Florida is among the most competitive grocery markets nationwide, and Publix and Sweetbay have been going at each other directly in recent years. Meanwhile, Jacksonville-based Winn-Dixie has been retrenching as it emerges from bankruptcy. Walmart is a dominant grocer in many markets, but not yet in Tampa Bay, and Target is expanding grocery sections in most of its local stores. Regardless of which store shoppers chose, they'll likely pay more for items that Americans don't normally consider luxury goods: Beef, pork and chicken, said Gary Karp, executive vice president of the market researcher Technomic Inc. "My advice to shoppers: Constantly reevaluate your options," Karp said. "That means everything from store brands to meal planning." Pasta prices have gone up, Karp said, but spaghetti remains an economical option. "If you like chicken, try skewers, or chicken meatballs. There are different ways to at least smooth out the cost curve."

rmullins@tampatrib.com (813) 259-7919 Twitter: @DailyDeadline

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