Spend Management in the Grocery Aisle — Watching Food Prices

Last week, The New York Times reported that food prices are likely to start heading North. According to the story, "grocery prices are likely to start edging upward again as the economy recovers" despite significant recent drops including a 2.3% monthly decline in beef in July and a 25% yearly decline in milk prices. But looking forward, the Agriculture Department forecasts that prices will "rise 2 to 3 percent this year" inline with the "recovering economy". Why are prices likely headed up? The Times suggests that the "reason food prices [will] continue to rise [is] that commodities like corn [continue] to trade above historical averages, even though they [have] come down from the unusually high levels they reached last year". Moreover, many of "the food categories that have recorded price declines, like beef, pork, poultry and dairy products, will begin to go back up as farmers cull herds and flocks, causing supplies of those products to decline".

As consumers -- not to mention category sourcing professionals -- looking at food commodities, what can we do to keep price rises in check? On many levels, since I don't think many soccer moms or dads want to get involved in trading options contracts to mitigate their own family pricing risk through hedging, I think the best thing to focus on is both demand management and product substitution. For example, consider how orange juice, an otherwise perishable commodity, can be bought and frozen (a sourcing manager from Pepsi once told me the fresh stuff you buy in the refrigerator aisle at your local grocer or in the four-pack at Costco is as good if you freeze it and thaw it out as needed, rather than simply buying it and using it before the expiration date is up).

Or consider buying certain items in bulk. But bulk does not necessarily mean buying in a wholesale or club format. You can also target bulk buys in more glamorous grocery digs such as the loose item section at Whole Foods. You know, the aisle with those plastic bulk bins frequented by back-to-nature Volvo driving types (who are often the same folk who are easily convinced by "fair trade" arguments if you're curious). And if these types of efforts -- along with more mundane ones such as clipping coupons and buying "value package" size amounts versus smaller formats -- alone are not enough to combat the rise in food prices, then you must take more serious steps on the demand management side of things. Such as substituting frozen peas and corn for the real thing. Trust me. If you add enough salt and don't over cook such vulgar culinary fare, you're captive dinner table audience won’t be the worse for it.

Jason Busch

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