Picking up Nickels

Friday, November 07, 2008

Grocery price inflation update

It's been about a year since my last look at increasing grocery prices, so it's about time for a brief update.

After examining my spending data, I found that our grocery spending through October 2008 has increased by 4.1% over the same period last year, which is far more modest than the 14.2% increase I noted in my last update. Also (with a few notable exceptions), I'm still finding that the amount of aggressive sale prices, promotions, and "good" coupons continue to be below 2006 levels.

Let's take a closer look at my shopping habits over the past year. While that 4.1% increase in grocery spending appears modest at first glance, it actually reflects some pretty serious effort on my part to cut grocery spending. For example:

  • In May I bought $1320 worth of Shaw's Supermarket gift cards for $1200 as part of their economic stimulus check promotion.
  • I spent about $52 acquiring coupons to cut grocery spending this year, as opposed to about $15 during the same period last year.
  • We participated in a Community Supported Agriculture (CSA) program for the first time this year, buying a share of the crop at a local farm for $10 per week. For twenty weeks, we received an assortment of lettuce and salad greens, cucumbers, flowers, tomatoes, peppers, peaches, pumpkins, corn, etc. as each item was in season. I wasn't able to quantify much grocery savings with the CSA program, but if nothing else, we did like supporting a local business that provided fresh, delicious, and pesticide-free food for our family.

Now, how about another gratuitous look at using "creative" product packaging as a stealthy way to raise prices? The subject this time is Unilever's Skippy peanut butter. After doing a little shopping, I found that the 18oz jar of Skippy Creamy peanut butter at my local market had been replaced by a 16.3oz jar, with the price also increasing from $2.00 to $2.50. You might think that buying a jar that contains 9.4% less peanut butter doesn't seem like a big deal, but comparing the increase in the price per ounce (from 11.1¢ to 15.3¢) might change your mind since it works out to about a 38% price increase!. I don't buy Skippy at the full price of course, but that is certainly a sobering price increase.

Time for a visual. Check out the subtle packaging change that Unilever decided to go with (see below). Unilever designed the 16.3oz jar (below left) so that it has the same height and footprint as the 18oz jar. The new jars can be stacked to take up the same amount of physical shelf space as the larger jars, with the only visible difference being that the new packaging is slightly thinner in the middle than its predecessor:

Now one might think that since we're in the middle of a recession/economic downturn, we'd see some grocery price deflation, like we've seen with plummeting gasoline prices. That's not going to happen though, thanks to sticky prices, where prices are raised because of things like higher oil costs, but not lowered once the reason for the price increase is no longer an issue. That's obviously not great news for consumers like you and me, but I do believe that the recent drop in commodity prices and the slowing economy will put the brakes on the sharp grocery price increases we've been seeing over the past couple of years. Now we just need a steady supply of sales, coupons, and promotions to manufacture our own grocery price deflation. :)



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