Higher Commodity Prices Cause Food-Makers to “Up” Prices

SUSIE GHARIB: Kraft (NYSE:KFT) says price hikes helped make it more money
in the fourth quarter of last year. But those higher prices also cost the
food manufacturer customers. Food companies have been raising prices to
cover higher commodity costs. As Diane Eastabrook reports, sometimes, it
takes a skilled eye to notice them.

DIANE EASTABROOK: This is the sound of sticker shock at the grocery store.
For the past year, customers at Harvestime Foods in Chicago have been
getting squeezed by higher prices from the produce aisle to the cereal
aisle. Higher commodity prices are to blame. Store owner Chris Dallas
shows how food manufacturers have been passing on the higher costs on in
subtle and not-so-subtle ways.

CHRIS DALLAS, OWNER, HARVESTIME FOODS: Breyers ice cream, which used
to be a half gallon — it’s no longer a half gallon. We’re now missing
quite a few ounces from there. Couple of items here that we had an
incredible price increase. One was the ancient harvest quinoa went from
$4.50 to almost $8.00.

EASTABROOK: Coffee has also gone through the roof. Analysts say
it’s up almost 30 percent, year over year. Chicken prices have increased
roughly 15 percent. Larger chains like Wal-Mart (NYSE:WMT) and Costco can
absorb the hikes more easily than a small grocer like Harvestime. Still,
Dallas tries to give his customers a break when he can.

DALLAS: If an item went up, let’s say, 15 percent, we might raise our
price 10 percent.

EASTABROOK: Morningstar (NASDAQ:MORN) consumer products analyst Ken
Perkins thinks the worst may be over.

to be some inflation, but I think that a lot of the companies have been
saying that they expect these costs to have peaked. But we still expect
them to flow through some of the next couple of quarters.

EASTABROOK: Once commodity costs stabilize, Perkins thinks many food
manufacturers might actually reduce prices. But Dallas says don’t expect
them to give back every price hike they’ve taken within the last several
quarters. Diane Eastabrook, NIGHTLY BUSINESS REPORT, Chicago.

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