The Shopping Cart Economist

Ok, I used to play with catering, but for the purpose of this post, no, my 100-box purchase of pasta last week was not for catering, rather, for personal household consumption.

Consumers right now are being falsely lulled into a sense of calm around food prices. We’ve seen deflationary pressure on certain commodities like beef, poultry, and grains. But I think change is in the winds again, and this time, for reasons unrelated to economy and recession. Instead, I think weather and climate change are going to be the next big catalyst for the increase in food prices.

I probably was not the only person to think it was strange that last month, there was snow on the ground in 49 out of 50 US states. Stranger was the warm patch of weather that hit my area. So while it was snowing in Florida, the warm spell was forcing the buds on my Asian pear and peach trees to open early. I’m hoping with the frost we’ve had the past two days, that I’ll even see any fruit on those trees. With no bees to be found about right now, I’ll be lucky to get anything at all.

That brings me back to the 100 boxes of pasta. Pasta is a wonderful staple food. With an average shelf-life of 2 years and tremendous versatility, in my house, it’s our wonderfood. The kids are content to eat it plain, and I can sauce, spice, bake and otherwise do just about anything with it.

Safeway recently dropped its generic pasta to .99c per box from $1.49 per box. That’s a 33% decrease in the retail price. The CEO came out and said they were lowering prices because it was good for the consumer. But I have a hard time believing that because this week, Safeway (stock ticker: SWY)is trading at it’s 52-week high. In fact, most food retailers and manufacturers are all trading at yearly, and for some, lifetime record highs.

So, if the cost of food inputs from the farmer are down, and then package sizes on items have decreased, and prices have stayed relatively the same since they started climbing two years ago, then on some items, it makes sense to shave the price and be seen as a champion for consumers. While I am not going to knock Safeway or any other store engaged in this practice, the consumer advocate person in me knows that the tactic is really about capturing market share and taking profit gains while they can. If these retailers are smart, I hope they sit on the cash they are generating now because I believe we’ll see inflation hit the grocery sector in a big way towards the end of the year.

Using a buy low, eat high philosophy here, if I buy the pasta at a price lower than the shelf price - in this case, .40c per pound, when the price of pasta spikes back to $1.49 a box, which I think it will, then I’ll have profited a $1.09 per box. That’s over $100 savings. In this scenario, I’ve negated the inflation and the potential for Safeway to yield to the pressure of decreasing the pack size of the pasta, which I think would be the next step before the price on the store shelf rises back up. Most consumers will notice the price jump back over .99c, but many won’t notice a shedding of 2 to 4 ounces in the pack size.

In fact, most of the branded competitors of generic pasta, like Ronzoni, Barilla, and others, have gone to as low as 13.5 ounces versus the standard 1-pound box of pasta. Notice however, the box packaging didn’t really change, just the weight in the box.

The lady in the checkout behind me asked as I was checking out if I was in catering. I replied no. When I said it was for personal consumption, she looked at me as if I needed a straight jacket. I simply smiled, knowing that when the price of wheat climbs this year, and the retailer starts to pass inflation back to the consumer, I’ll be happily munching my stir-fried shrimp pasta for pennies on the dollar while shoppers that lack the ability to see through marketing ploys or sense inflationary danger wonder how they’ll put food on the table tomorrow.

Silly title, I know, but I’d like to convey that the size of the package does not correlate to the overall economic value of what’s inside the package.

Case in point, the watermelon. It’s my family’s favorite summertime fruit. It’s low in calories, has basically no fat, and it seems to do a great job keeping me hydrated. Here’s the problem though.

For years, I’ve resisted the personal-sized watermelons marketed by Dulcinea. $3.00 for a personal watermelon seemed excessive for a 3.5 pound melon when a large seedless watermelon could be had on sale for .39-.49c per pound on average - and sometimes even less!

So I bought my .39c per pound watermelon. The average large melon seems to range between 12-15 pounds, so for .39c per pound, the average cost of a large seedless watermelon is about $5.25. That’s nearly 10 more pounds than one of the personal Dulcinea watermelons. Great deal, right? Well, maybe not so great.

The next part of this is my unscientific, unproven (yet quasi-tested) musings about why that thinking might just be wrong.

When you have a 13-pound watermelon for $5.25, the average large variety watermelon is about 60% usable. The rest is rind weight you’re paying for. That means the usable portion is about 7.8 pounds. That brings the usable portion of watermelon up to .68c per pound. The Dulcinea is about 95% usable, meaning that for a 3.5# personal melon, your rind waste is about .12 of a pound. That’s roughly .88c per pound for usable melon.

Now that we’ve taken the rind out of the equation, the price difference between the two melon types on a pound per pound basis is only about .20c difference.

Let’s take this a few steps further. You now have 7.8 pounds of watermelon. Cut watermelon doesn’t last well much past a week. So unless your family can crank through it before it goes bad, it will wind up in the trash. Plus, in my experience, the larger the watermelon, the greater the tendency to have a mushy, stringy center that you wind up having to cut away and toss. The usable fruit that you toss in this process will increase the overall cost per pound.

If you’ve ever cut up a large watermelon, you’ll know how much trash the rind can generate. If you are cutting up that 13# watermelon, you’re left with about 5.2 pounds of waste. Unless you’re composting (and rinds take quite a while to break down), then you’re filling up your trash can faster after you buy a large melon and cut it up. Watermelons are over 90% water. The larger a melon is, the more resource-intensive it is to grow.

So for those interested in the real cost of food, who think about food miles and where their food is coming from, this is where the smaller melons make up the difference in the price per usable pound. A semitruck typically can lug forty-four thousand pounds of food. The larger the melons, the less of each unit will be on the truck. A large-melon truckload will likely generate more overall waste due to the rind weight.

The smaller melons will hit more people’s tables. They were less water intensive to grow, and they theoretically generate less waste. When you add in these other factors, which most people quite honestly don’t, the smaller melon truly does become the better deal with regards to the total economic value of what you’re buying.

A watermelon makes for a great example to illustrate this point. But it also holds true for things like cereal and bags of chips and caseload goods from big-box warehouse stores. The bigger packages aren’t always the better deal. Sales in your local grocery stores more often than not have better deals on a price per ounce/unit basis. What these bigger pack sizes do is provide convenience, but ultimately, as in the case with the melon, you might wind up paying more for the hidden costs and the loss associated with the waste than had you just bought the smaller, usable pack size in the first place. The perception of spending less to get more could actually cost you more in the long run.

I am the world’s worst blogger. Sorry, I know it. I should get back in here more often, but with what’s going on in the world health environment it was a really motivator to get in here and blog today.

First, let’s talk about flu. It’s important to note that flu is passed by coming into contact with a sick individual through the mouth, eyes, or nose transmission. (That means cover when you sneeze please!). In this case, the flu is suspected to have been caused by animal to human transmission (hence the “swine” in Swine Flu).

It’s then even more important to stress that you will not contract this flu by simply eating pork. (And no, I am not going to get into all the religious implications about some religions and their thoughts around eating pork).

But this does have an implications for your wallet. It means that you’re going to find pork on sale through unadvertised specials. It’s the product of pandemic hysteria around H1N1 “swine” flu. So even though you won’t get swine flu eating pork, it doesn’t matter, the perception is already out there and stores are going to have to contend with it in order to move inventory.

Industries that are affected from bad press tend to mark down their products as a way to combat negative publicity. We saw this a few years ago with all the hype around Avian flu. Poultry prices fell. And we saw it recently with peanuts, where Skippy and Jif slashed prices and put out high-value coupons to both move the inventory and to let customers know they weren’t going to get salmonella from eating jarred peanut butter.

So if you haven’t already seen cheap pork in your supermarket (cheap being $1.49 or less per pound) you will. And it will be a good time to fill your freezer.

I do feel sympathy for the pork industry overall because animals, like people, get sick. It is what it is. This flu has nothing to do with quality or safety of the meat itself (although I would imagine that cleaner, safer facilities could have positive impact on limiting transmission). The media has done a good job trying to convey that eating pork won’t make you sick, and many countries and even the World Health Organization (WHO) feel that the pig is being maligned unfairly. And rightly so. It’s not the animal’s fault - it’s just how illness works.

That said, I am going to plug the US Pork Industry and those who work in it. This is a good wake-up call to get a better sense of where your food is coming from and ask questions about its origins. We do have many responsible pork producers in the US. And the USDA does a decent job overseeing them. In an already tough economy, it’s not a time to let this industry fall because of what’s going on with this flu.

However, I have to say, I am going to be skipping the imported varieties. So as an example, Safeway has imported pork baby back ribs on sale for .99c a pound starting tomorrow. Sounds like a good deal, right? They normally retail for $3.99-$4.99 per pound when they are produced in the US. However, these imports come from China. All I can say is “bleck". Seeing as how I am pretty much on a boycott of any foods directly imported from China, I’m going to have to pass on these, swineflu or no swineflu. And of course if I’m going to buy pork, I’m going to buy as locally as possible.

As a bit of humor, I’m reminded of an episode of The Simpsons where Lisa decided to become a vegetarian:

Homer: Are you saying you’re never going to eat any animal again? What about bacon?
Lisa: No.
Homer: Ham?
Lisa: No.
Homer: Pork chops?
Lisa: Dad, those all come from the same animal.
Homer: Heh heh heh. Ooh, yeah, right, Lisa. A wonderful, MAAAGical animal.

Ultimately, if your family likes pork, it’s going to be a good time to buy it, stock up, and save money. You won’t catch the flu!

Last December, I started the Shopping Cart Economist because I’d seen the writing on the wall for what was happening in the food market globally, and it didn’t look good for consumers.

I made some predictions for 2008 in specific categories and while I’d like to pat myself on the back for being right on in nearly every category, the sad thing is, I was right on in nearly every category - food prices did nearly exactly what I thought they were going to do, which was a bad thing for American consumers.

If you missed the blog post, you can read it here. But, here’s some highlights of what I predicted for 2008, and what really happened. *Note - these are non-sale prices.

Soda - due to the increase in the main ingredient, corn syrup, my thought was that a 2-litre of soda would hit $1.99 this year. 2-litre bottles sat forever at $.99c and this year, not only hit $1.99, but in some stores, I saw it as high as $2.19. The price of a retail 12-pk of coke right now? $6.59. A gallon of soda now costs more than double that of a gallon of gas, and nearly 1.25 times a gallon of milk.

Milk - My prediction was going to be that it would hit or come close to $4 a gallon. This summer, milk was astronomically high. A gallon of 2% store-brand (lucerne) from Safeway was $3.89 - just shy of that $4 a gallon mark. That’s not to say milk isn’t used as a loss leader for many stores, but to walk in and get a gallon with no coupon or sale, the retail price point was the highest I’d ever seen it.

The bigger shocker was in the price of dairy-processed foods. The most notable, which I was not expecting, was the price of Kraft Philladelphia Cream Cheese. Once easily available with no sale for $1.99 for 8-ounces (and always on-sale for .99c each), Kraft Cream Cheese in my neck of the woods had a retail price of $3.59 for 8-ounces. Talk about a jaw dropper - that’s a 55% increase in one year. Most branded icecream went to $6.59-$6.99 per half-gallon (which is really not a half-gallon at all - it’s 1.75qts), string cheese, for packages that had cost $4 at the beginning af the year went to nearly $9 a package. And the biggest kicker for me, Tillamook cheddar 2-pound baby loaves of cheese - $11.99 from $9.99 with the holiday sale prices only falling mometarily to $5.99 instead of the historical $3.99 for 2-pounds.

I have to say a big THANK YOU to the pork farmers of America. They managed to hold prices throughout the year on fresh pork products, and my hypothetical guess on this is that with beef prices as outrageous as they were, they managed to increase their market share with many people converting from beef to pork as a protein source. However, processed pork products had a pretty steep price increase for things like packaged bacons, sausages, and sliced deli ham. Sliced luncheon meats in general were astronomically priced this year with the generic store brands reaching as high as $7.99 a pound for sliced deli ham.

Eggs - as predicted, the price of eggs climbed, and we never saw relief even at times when egg prices normally fall (think Easter and other “baking” type holidays). Normal retail price for eggs could be seen as much as $3.29 a dozen, and even eggs at discount places like Costco were abnormally high. And cage-free or any of those types of products? Forget about it! There was no way I was paying over $5 for a dozen eggs - I’d rather build a chicken coop in my backyard. Which, ironically, people actually DID!!! In fact, this year, the price of eggs sent people to community egg co-ops where they joined in to raise their own eggs for less per dozen than they could be had at the store.

Grains/Breads - Sadly, we’re not going to come out of this, and what happened with bread/grain increases is just a foreshadow I believe into prices next year. Store brand generic white bread doubled in price to $1.99 retail, with brands like Sara Lee, normally the $1.99 price point, jumping to $3.69 per loaf. And specialty breads? My favorite french, La Brea, was $5 a loaf. Specialty flours and organic varieties were particularly hurt hard by price increases, so the cost per loaf for some breads crossed the $6 mark.

And cereals? Well, I hope you all took note of how General Mills came through for us with a 10-ounce box of cereal at the same price as what the 12-14 ounce boxes used to cost. $4.59 for a box of Quaker Oatmeal? I don’t hold much hope for the big Quaker sale that’s normally happens in January. I have yet to see the coupons for it, and I don’t believe we’ll see much under $2 a box on sale.

Beef - After a year of crazy beef prices with prices I’d never seen before, the Christmas ribeye in 2007 that failed to fall below $5 was back to its 2006 prices of $3.98 (yes, I stocked up!). The beef market has been hit hard by the economy. At one point, people couldn’t afford to buy it, and prices of fallen. But the beef industry is hurting as their costs of production are more than the price they are receiving for it at the market. And yet the price of a pound of ground beef in this morning’s ad was still $3.99 for 93% lean ground beef. Overall, beef prices climbed to a point that most Americans are still going to have a hard time affording.

Produce - my prediction was that we’d see more local produce in the market. Even I became my own producer this year thanks to George W’s economic tax stimulus rebate. But one of the things I’d mentioned was that local wasn’t going to mean the farmer’s market, rather, more stores would be buying local produce. Safeway and Albertsons in my area went as far as relabling their produce signs in the department to show country (or city/state) of origin on the produce. They’ve made a big fuss over buying local. And even Wal-mart, the store with connotations of outsourcing and killing local economies, is now the largest purchaser of local produce in the United States. And the local produce was priced right. If you were lucky enough to live in a market with good local produce production, prices for things like Gala apples (.68c per pound) and cucumbers (2 for $1) were the best deal going this year.

Sadly, as the world markets crumble around us, the food market is the only thing that seems insulated against falling prices which is bad for an American public in a time of financial crisis. More people have food access issues than ever before, with the highest number of Americans on food stamps ever happening this year.

I’ve got some predictions for next year’s prices which I’ll try to get posted here in the next few days before the new year, but I don’t think it’s going to be pretty.

It’s bad enough that we have to do laundry at all. It’s a total PITA to get it done, washed, folded, and put away, but then to have to pay more for laundry detergent to get it washed??? It’s enough to make me switch over to disposable clothing and edible underwear

What’s the big deal? For years, the industry standard for laundry detergent has been 100-ounce bottle for liquid (note, I don’t use powder, so I can’t speak to sizes/prices, other than to say there is some increase happening there). I am sitting on a stockpile of Arm and Hammer brand detergent that I bought last year which were 100-ounce bottles. A quick check on the detergent aisle shows me they’ve switched the bottle size to 80-ounces instead. My 100-ounce bottle says it’s good for 32 loads. The 80-ounce bottle says 51 loads. The price for Arm and Hammer has stayed relatively steady. At Walmart (which is rare for me to walk into) the price was $4.97 yesterday for the 80-ounce bottle. Last year’s price for the 100-ounce bottle was similarly priced. It’s important to note that Walmart is usually about 10-20% less than traditional grocery stores like Safeway or Albertsons for cleaners, so from quick memory, I think the Arm and Hammer at Albertsons is closer to $6.59 to $6.99 not on sale.

So, if the ounce size is less, but the load size is more, and the price is relatively similar, why is this a problem? Using Walmart’s pricing, the price in the old bottle was 4.9 cents per ounce. In the new bottle, it’s 6.2 cents per ounce. Less in the bottle, even with the supposed increase in load size doesn’t change people’s washing habits that they’ve had for years….most are still using a capful regardless of the directions on the bottle. So Arm and Hammer winds up taking consumers to the cleaners, literally! Having front loading machines and being conscientous of the environmental impact of detergent, that 100-ounce bottle does last me more than what the bottle says it will, but for general shoppers, they are pouring money into their wash machines with every load.

And it isn’t just Arm and Hammer. Tide has had a HUGE price increase in a year. Again, using Walmart prices, 100-ounce Tide was $12.83 for between 48, 51, or 64 load capacity depending on the flavor of detergent you were buying. This is up from $10.99 just a year ago, and less the year before. The 100-ounce ALL detergent - $8.44, up from $6.99. Even Purex, historically a low-priced brand was sitting at $5.97, up from $4.99 a bottle. Again, factor higher prices from your regular grocery store versus Walmart’s pricing here, and you’re paying even more than you were a year ago to do the wash.

And then of course, there’s the proliferation of concentrated detergents like All Small and Mighty professing to be 32 loads for $3.99….I have yet to get 32 loads out of that bottle, even as a conservative user.

So why the change in bottle size? Quite frankly, it’s a bulky product taking up lots of space on a truck. The smaller the bottle, the more that can ride on one semi-load. And if the price per ounce is up, but your personal consumption hasn’t changed, then the detergent companies are the only winners in the laundry wars that happen in American households everyday.

If you want to avoid being squeezed on detergent prices, some easy advice would be to stick to branded, but less marketed brands like Arm and Hammer and Purex. Tide is notoriusly expensive with dismal coupon values. Use significantly less detergent. If it calls for a full capload, try a 1/4 cap instead. What’s cleaning your clothes isn’t the soap…it’s the process of being agitated in the machine and being rinsed through the water. I mean come on, people used to beat their clothes with rocks in the river and that did the trick just fine! Lastly, don’t buy the detergent when you need it, and don’t be brand loyal. This is one item you can get away with trying to save on, unless you have some specifically weird allergy to detergents. Buying and stocking up when it’s onsale will save you from paying full price later, and switching brands when they have high dollar coupons that match the sales will help cut costs.

Key takeaway - don’t wash your money down the drain. Pay attention to the price per ounce and don’t be fooled by load size per bottle - it’s a meaningless and shameless marketing tactic.