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Now that the price of oil has dropped — you should expect some of those skyrocketing grocery bills you've been paying to drop, right? Yeah... probably not.
It's called "sticky prices" — the tendency for companies to delay both raising — and then lowering prices in response to changes in the cost of raw materials. You see, what you pay at the grocery store has more to do with what competitors charge than it does with how much it actually costs to produce the item.
Grocery Store Economics: Oil Prices May Go Down, But Don't Expect Your Grocery Bill To Shrink (http://consumerist.com/5065874/oil-prices-may-go-down-but-dont-expect-your-grocery-bill-to-shrink - broken link)
Well just maybe, when people can no longer afford all those foods and do most of their shopping at the Dollar stores and such these grocery store chains will wake up and realize our economy is not going to support their high cost anymore. Even now I heard on the news that more and more people are finding the discount stores to do their shopping.....
If no one is buying their food they will have no choice but to lower their prices!
I've already noticed food prices dropping quite a bit because as a single person my purchases are limited and it's the same usual stuff. With a shrinking economy and production geared up for previous demand, prices will have to come down or stuff is going to sit on shelves.
For instance of what I purchase:
loaf of bread, $2.79 this summer, now $1.49
corn chex, $3.19 this summer, now $2.00
french bread pizza, $3.79 this summer, now $2.69
Well just maybe, when people can no longer afford all those foods and do most of their shopping at the Dollar stores and such these grocery store chains will wake up and realize our economy is not going to support their high cost anymore. Even now I heard on the news that more and more people are finding the discount stores to do their shopping.....
If no one is buying their food they will have no choice but to lower their prices!
I know that both of the Dollar Trees near me now have frozen and refrigerated sections along w/ 3 - 6 aisles of dry/canned/packaged foods. I go there for a lot of my stuff now. And because so much of their merchandise is now going out a MUCH quicker pace, the expiration dates are usually the same time frames as grocery stores. The other day they even had frozen single serves of beef steaks wrapped w/ bacon! for $1!!!
It's called "sticky prices" — the tendency for companies to delay both raising — and then lowering prices in response to changes in the cost of raw materials. You see, what you pay at the grocery store has more to do with what competitors charge than it does with how much it actually costs to produce the item.
A few points:
1) The CURRENT oil prices may be in the $40/barrel. However, the cost of a barrel of oil 6 months out is MUCH higher. Many believe that the cost of oil is artificially low and will stabilize in the $60s.
2) When the commodity prices went crazy six to twelve months ago, a lot of companies entered into contracts to hedge the price of the commodity. They locked in prices that are actually higher than the current market price. Therefore, their costs are higher than the current market. I know that I am in that situation on a couple of the commodities that I purchased in the past year. My costs won't go down until March when the contracts run their course.
3) Price increases equate to additional profit. If I can get my customer to accept a price increase, why lower the price? If the customer accepts paying $0.75 for a candy bar, why lower it just because the costs decreased? How if sales go down or people switch to a competitor, then the business will either have to lower the price (unlikely) or increase rebates and/or coupon.
Prior to Starbucks, people expected to spent under $1 for a cup of coffee. Starbucks created a market for $4-5 coffee drinks. Now that some chains like McDonald's and Dunkin Donuts are offering the same beverages for less, Starbucks sales are declining.
4) When food prices raise 10%, household grocery spend does NOT necessarily spend 10% more. Consumers make informed choices. They trade down. If strawberries are $5/pt, they buy a different fruit. They head to alternative stores (Aldi's vs. Safeway).
Personally, my grocery bill has not been going up. As prices increased in the past year, I moved more of my spend to local independent markets and to discounters like Aldi's, international supermarket,dollar stores, and surplus retailers. It has been YEARS since I have shopped at Kroger's, SuperValu or Safeway for a significant grocery shopping experience. (Occasionally, I do drop in for a specialty item or a loss leader item.
If we want to see lower prices, we have to be more like our grandparents. That is, when we believe that an item is overpriced, DON'T BUY IT! Find another item that can fulfill the purpose and buy that. Use private label brands. Check out discounters like Aldis. make full use of coupons.
If we want to see lower prices, we have to be more like our grandparents. That is, when we believe that an item is overpriced, DON'T BUY IT! Find another item that can fulfill the purpose and buy that. Use private label brands. Check out discounters like Aldis. make full use of coupons.
To be more like a lot grandparents that means planting a garden, cooking from scratch and even canning. Some folks that have been above that around here looked at us that do as being poor. They wouldn't be caught dead shopping at Aldis now I see them there. But they are "only getting snacks to feed our son and when the team comes over". Whereas I have always been frugal with my money to shop there to supplement what we don't grow or make.
Your biggest food dollar savings comes from scratch cooking not helping Hamburger Helper company become wealthier.
Ditto, Jaxon. We bake our own bread. We can pay $16.00 for a 25 lb bag of flour that makes 40 loaves of bread, buy yeast in huge cakes on sale and stick them in the freezer. We use local honey and real butter, and even throw in oatmeal. Better, better for us, and cheaper in the long run. The frozen food is mostly deer. We occasionally buy a box of bacon ends. We can our own vegies, and if push comes to shove buy the frozen ones in big bags and allot out what we need rather than restricting ourselves to what's in the cans.
Our total cost at the grocery store runs about $74 for two people every two weeks. And some of that is non-food items, like TP and cleansers.
But note the prices of diesel - it didn't come down like gasoline. And diesel is what the delivery trucks run on...
And then there is the subject of additives and other car items. Was in Denver for Christmas and stopped in Auto Zone to pick up an extra quart of oil, wsw solvent, and antifreeze. valvoline 10W30-$4.00, wsw solvent $2. 49, Prestone $11.99. It was maybe three years ago I got antifreeze for half that price, and this past summer I bought it at $10.49, so with the gas price going down the antifreeze went up another 15% ON TOP OF the big increase originally. Disgusting, very.
But note the prices of diesel - it didn't come down like gasoline. And diesel is what the delivery trucks run on...
I asked on another thread but no replies to it so maybe somebody here can answer. Does the barrel prices of oil reflect in the price of LP gas? In Nov for the same amount of gallons I got again in Dec the price jumped $100 in Dec. This is after the barrel prices came down and reflected at the gas pumps! I don't understand why diesel has been so high even before we were paying $4 per gallon for gas it was way up there. Our food costs will factor in those diesel trucking costs you are right. I'm wondering if diesel remains high because so many farmers were growing corn for ethanol taking away corn from our food chain? Thoughts anyone?
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This is after the barrel prices came down and reflected at the gas pumps! I don't understand why diesel has been so high even before we were paying $4 per gallon for gas it was way up there. Our food costs will factor in those diesel trucking costs you are right. I'm wondering if diesel remains high because so many farmers were growing corn for ethanol taking away corn from our food chain? Thoughts anyone?
