Monday, November 24, 2008

"Sticky" Food Prices

I just finished a Washington Post article ("The Frugal Gourmets," Nov. 21) that offered some interesting views into retail food sales. As you might expect, many shoppers are seeking value, rather than top-quality, when searching for food. With increased economic uncertainty, as indicated by a continued fall in stock market indices, many buyers are looking to save money on food purchases.

The article cites research showing that consumers are shifting away from restaurants toward grocery stores, preparing more of their own meals. However, they are finding that lots of grocery item prices are "sticky." That is, the prices were quick to move upward with increases in commodity (oil, grain, meat) prices. However, grocery prices have been slow to follow commodity prices back down.

What does a shift in consumption mean for you? Does it signal a shift away from high-valued fruit or vegetable crops? Does it make it even more important to hone in on those consumers that will continue to purchase such items? Does it allow you to maintain higher prices; thereby increasing your profits? Whatever the case, the situation points out the importance of knowing the customers and the markets in which you operate.

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