Given that food price increases often are blamed on higher prices at the pump, one might suppose the dramatic drop in the price of gasoline in recent months would translate into lower grocery bills. But food producers and grocery wholesalers say consumers shouldn’t expect to see any drastic change even though the fuel costs they’re incurring to transport their products are lower.
“From what we are hearing, most industry participants are skeptical that this level of fuel pricing is here to stay,” says Emile Breaux, executive vice president and chief operating officer of Associated Grocers. “So reacting by lowering prices would mean that prices would need to rise again as fuel prices creep higher.”
That said, Breaux predicts shoppers will see short-term price dips on staple items such as bread and milk due to the percentage of their overall end-unit costs that transportation represents.
“That will be limited, however,” he says.
While higher fuel costs in recent years did drive up grocery prices, Breaux says producers and wholesalers absorbed a lot of the increase. Now that prices are low, he believes most businesses will use this “relief” period, at least in the near term, as margin relief.
“Should low fuel prices persist to the point where businesses determine this to be the new normal, then I would expect to see price reductions done strategically but not as a wholesale shift in pricing, overall,” he says.
One possible impact grocers are seeing from the lower fuel costs is increased spending. Local supermarkets reported higher-than-average sales during the recent holiday period.
“This leads me to conclude that consumers are feeling a little better about their current situation and opting to spend more freely than previously anticipated,” he says. “This may not have evidence on a national scale, but in our market is does seem to be a good sign. —Stephanie Riegel
