Customers Win, Stores Lose Grocery Wars

Supermarkets Losing The Grocery Price War

Food prices are low, and there's sharp competition among supermarkets.  That's good news for shoppers but not necessarily good for stores.

There are plenty of deals out there, thanks to price deflation.  Grocery store item prices dropped 1.3% last year -- the first yearly decline since 1967, according to the Agriculture Department's Economic Research Service.

"The traditional supermarket is fighting tooth and nail to keep you," said "Supermarket Guru" Phil Lempert, an expert analyst on consumer behavior and marketing trends.

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That fight is especially important for stores when you consider the average household spends about $107 per week on groceries, according to the Food Marketing Institute.

 

Falling food prices are eating into a store's bottom line, so they need to sell more volume to make up for the loss, according to Lempert.

Across the board, meat, chicken and eggs have seen some of the biggest price drops.  Why? Too much supply and fewer exports.

"Beef, pork and chicken, the supply is abundant, and that has brought the prices - cost and retail for consumers - down quite a bit.  I think that will probably be the case for the foreseeable future," said John Persons, President Chief Operating Office of Tops.

 "We took the approach early on that we were going to pass those cost reductions right on to the customers.  Immediately we lowered the price of eggs.  The same with beef and the other meat commodities," said Persons.

According to the USDA, between 2014 and 2015, agricultural exports dropped by about 11% or $17 billion.  That comes at a time when labor and other costs are going up.

"Prices are down for us as consumers, but that margin that retailers are working on is getting even more narrow," said Lempert.

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Wegmans advertises its "Consistent Low Pricing" on a list of items that changes based on food trends.

"We took a look at what families are buying most, things like eggs, milk, orange juice, ground beef, things they have in their shopping basket.  We wanted to make sure that we can beat anyone's price on those particular items," said Wegmans Consumer Affairs Manager Michele Mehaffy.

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