Grocers and manufacturers clash over high food prices
There’s a tug-of-war under way over food prices between U.S. supermarkets and giant food manufacturers such as Nestle, Unilever and Kellogg.
The nation’s big grocery chains contend that food manufacturers have raised prices too fast and too far, considering large drops in prices for fuel, corn, wheat and other important commodities in recent months.
The food companies disagree and say they are still coping with many rising prices themselves.
At issue are surging wholesale prices for products such as Nestle’s Dreyer’s Grand Ice Cream, which recently rose 14 percent even though the price farmers receive for milk — its main ingredient — has dropped more than 40 percent from a year ago.
Kraft raised the wholesale price of a box of its staple macaroni and cheese an average 9 percent in the past 12 months, according to several chains, despite 38 percent to 68 percent plunges in cheese and wheat prices. These increases factor in the growing practice by the manufacturers to shrink the contents without reducing wholesale prices.
The grocers are fuming. One large grocery company operating in Southern California has seen the wholesale price for a carton of Kellogg’s Corn Pops rise about 17 percent since June — despite a 33 percent plunge in corn prices from a year ago.
“It’s disingenuous to consumers that all commodity costs are coming down, interest rates are coming down, everything is coming down, and (the national brands) are taking their prices up,” Steven Burd, chief executive of Vons owner Safeway Inc., told investors last week. Jeff Noddle, chief executive of Supervalu Inc., described the conflict as “kind of a battleground with manufacturers right now. We are pressing for a reduction in prices.”
The cost of the raw goods that go into almost every food product have fallen by substantial amounts, said Jonathan Feeney, an analyst with Janney Montgomery Scott in Philadelphia.
The dropping price of grains “has widespread impact across food; not only are corn, soybeans and wheat key ingredients in products up and down the snack, cereal, soup, bakery and other aisles, but they also serve as key inputs in commodity protein and dairy production,” he wrote in a recent report to investors.
Unilever called the situation “complex” with pricing levels remaining “both volatile and unpredictable in the medium to long term.” Grocers said that Unilever last year increased the wholesale price of its Skippy peanut butter by about a nickel a jar after shrinking the contents of the container by almost 10 percent.






