Eight-cent eggs: Consumers gobble cheap food, grocers squirm
CALLit the Great Grocery- Store Giveaway of 2016.
In Austin, Texas, Randalls slashed prices for boneless beef ribs by 40 per cent, to US$ 3.99 ( RM16) a pound.
Not to be outdone, the H-E-B grocer down the street charged US$ 1 a pound less.
Albertsons recently advertised a deal you don’t normally see on your finer cuts of meat: “Buy one get one free” specials on “USDA Choice Petite Sirloin Steak.”
And what does US$ 1 buy these days? In North Bergen, New Jersey, you could pick up a dozen eggs at Wal-Mart. (OK, the price was actually US$ 1.14.).
A mile away, check out Aldi, the German supermarket discounter, which can actually break the buck – 12 eggs for 99 cents. A year ago you would have paid, on average, three times that price.
In a startling development, almost unheard of outside a recession, food prices have fallen for nine straight months in the US. It’s the longest streak of food deflation since 1960 – with the exception of 2009, when the financial crisis was winding down. Analysts credit low oil and grain prices, as well as cutthroat competition from discounters. Consumers are winning out; grocery chains, not so much. Their margins and, in some cases, their stock prices, are taking a hit.
Eggs and beef have have grown especially inexpensive, and it isn’t only an American phenomenon: In England, Aldi recently offered its prized eightounce wagyu steaks from New Zealand for about US$ 6.50 – a little more than the price of a pint of beer.
“The severity of what we’re seeing is completely unprecedented,” said Scott Mushkin, an analyst at Wolfe Research who has studied grocery prices around the country for more than ten years. “We’ve never seen deflation this sharp.”
Mushkin, who researches local markets, recently found that prices of a typical basket of grocery items in Houston had fallen almost five per cent over the past year.
He credits, in part, the discerning behaviour of shoppers like Manny Sinclair.
On a weekday lunch break, the 43-year- old contractor stopped by a Wal-Mart in Secaucus, New Jersey, to pick up turtle food and paper towels.
Sinclair typically buys groceries at his local ShopRite but has recently noticed the steals he now finds at discounters.
He glanced at the meat case, where a 12-pack of “Angus steak burgers” fetched US$ 15.82 and grass-fed ground beef could change hands for US$ 4.96 a pound.
Sinclair was intrigued but, in the classic logic of a shopper in an age of deflation, figured he might find even lower prices elsewhere. Along with two WalMarts, a Target and an Aldi, the area even offers a Family Dollar that features a small refrigerated section.
“Wherever I find the good deals – that’s where I’m at,” Sinclair said.
At first, falling prices helped grocers. Low- cost commodities pushed down the tab for meat and packaged food and boosted profits. Now, deflation has turned ugly for the industry. Led by Wal-Mart, retailers are pushing down prices, eating away at their profit margins.
“It starts to border on irrational pricing,” said Jennifer Bartashus, an analyst at Bloomberg Intelligence. “People are lowering prices just to draw traffic, without thinking about their margins.”
Supermarkets are facing competition not just from WalMart Stores and Aldi but also dollar stores and online retailer Amazon.com. It could get worse. Lidl, one of Aldi’s German competitors, is building three distribution centres on the East Coast and plans to open US stores by 2018.
Even Whole Foods Market – famously derided as “Whole Paycheck” – is trying to compete on price through digital coupons and promotions on items such as beer and produce. — WPBloomberg