September 17, 2009

Grocers turn to price cuts: Is this war?

Falling commodity prices have coincided with dropping prices in grocery stores, data released by the U.S. Bureau of Labor Statistics indicates.

On the Chicago Board of Trade, corn prices are down 56 percent from their peak in July 2008, The Washington Post reported Thursday.

Meanwhile, in grocery stores, where price changes tend to lag from changes on commodity exchanges, the grocery consumer price index is down 2.5 percent from its November peak, the bureau said.

In 12 months, the consumer price index for all items, including food and energy, has fallen 1.5 percent.

The declines have been so broad that even the core-needs kinds of spending have taken hits, Adam York, an economic analyst with Wachovia told the Post.

Consumer budgets are pretty tight right now. You're going to do anything that you can as a retailer to keep consumers in your store, he said.

Supermarket stores Giant and Safeway have cut prices, as an era of adding gourmet niche items, like sushi, to lure customers, has given way to an era of cutting prices to keep customers buying, the newspaper said.

Does this mean a pricing war?

Steve Neibergall, president of Safeway's eastern division, said price competition feels like it's kind of at an all-time high.