March 2, 2009

Sellers and makers dispute food prices

Large U.S. grocery chains are pressing food manufacturers to lower prices, pointing to sharply lower commodity costs and questioning why prices are rising.

Prices for fuel, corn, wheat and milk have dropped sharply, but food manufacturers have increased prices, anyway, the Los Angeles Times reported Monday.

For example, cheese and wheat prices have fallen 38 percent and 68 percent, respectively, in the past year, the newspaper said. In spite of that, Kraft has raised the price of its macaroni and cheese by 9 percent, the stores said.

Since last April, the nation's dairy farmers have seen the price they receive for milk drop 36 percent. During that period, the price of Nestle's Dreyer's Grand Ice Cream has risen 14 percent, the newspaper said.

It's disingenuous to consumers, said Steven Burd, chief executive officer of Vons, which owns Safeway Inc.

Manufacturer Unilever, however, said pricing was both volatile and unpredictable in the medium to long term, calling the issue complex.

But, retailers said customers will retaliate by shopping for food at discount stores, avoiding name brands or doing without for a while.

I say wait and see because we're going to chew them up on corporate brand, Burd said.