Economy has mixed effects on area grocery stores

Nontraditional grocery store models are finding success despite rising prices.
Elizabeth Kresal and Richcard Nielseu shop at Seward’s Co-Op on Monday. Kresel mentioned she is trying to start a garden in her community to save money on produce costs.
March 10, 2011

Temporary issues like weather and a salmonella outbreak have recently driven up food prices.
So has the rising cost of gas. But this problem –– and the resulting cost increases at grocery stores –– may not be temporary.
According to a recent report from the Consumer Price Index, food prices increased 1.6 percent nationally in 2010 and 0.5 percent in January 2011 alone. In the Midwest, prices rose 1.9 percent in 2010 and matched the national increase in January.
Wheat, corn, soybeans, rice, sugar and cocoa are all up, according to Edward Usset, a grain marketing specialist at the University of Minnesota. He said increases can be blamed on a “bull market of commodities” — signifying that prices are expected to continue rising.
He does not see them going down anytime soon either.
Laurel Bauer, the owner of Dinkytown’s House of Hanson, said prices are definitely going up all across her store.
“It’s affecting milk, it’s affecting bread, it’s affecting everything that goes into a pizza,” she said.
Bauer said part of the reason for the increased prices is the harsh winter that struck across the country, especially when it comes to produce.
“Lettuce, tomatoes, any fresh produce, anything green has just about doubled in price,” she said.
On top of that, fuel prices and fees compound her invoices. She said this started happening once gas prices topped $3 per gallon.
“It just costs more to get it here,” Bauer said. “Every distributor adds a fuel service charge.”
House of Hanson works with 39 different distributors who deliver anywhere from twice a week to once every three weeks.
“Transportation is a big, big part of all foods because we move them around a lot,” Usset said.
Meanwhile, Gopher Grocery President William Orkin said the economic climate has yet to hurt his company.
“We’re trending at a 15 to 20 percent increase in this year as compared to last year,” he said. Both revenue and number of customers are up in the first two months of 2011.
Mounting gas prices have attracted more customers as they see it as a way to save money.
Orkin said with Gopher Grocery’s $2 delivery fee — now almost half the price of a gallon of gas — customers are bypassing a trip to the store to save money.
Started in 2006, Gopher Grocery has expanded delivery from its original two zip codes to more than 100. Orkin said their growth is not necessarily economy-driven but due to more people finding out about the company.
Similarly, Tom Vogel, the marketing and membership manager at Seward Co-op, said the store has thrived in recent years, even undergoing an expansion.
“As far as the economic effects, we haven’t been negatively or adversely affected by that,” he said
Seward Co-op has gauged this measure not just through sales, but increases in membership, which has risen to 8,000. Vogel said he believes the co-op business model has attracted more members.
Co-op businesses are voluntarily owned by their members and operated for their benefit.
Along with other benefits, customers make a $75 stock investment to Seward Co-op to become a member and have a voice in how the business is run.
Vogel said this sense of ownership appeals to more people and influences how and where they shop.
“I think a lot of people are starting to look more seriously at what organization they give their money to,” he said.
While their prices may be a little higher for some products, Vogel said, customers prefer the “local connections and transparent food trail” that the store offers, especially in light of recent recalls from bigger food companies.
For example, after nearly a half-billion eggs were recalled in August 2010 due to a salmonella scare, Vogel said Seward Co-op sold out of eggs because customers knew exactly where theirs came from and knew they were not contaminated.
To Usset, the nontraditional grocery store models of Gopher Grocery and Seward Co-op are an example of the market’s “corrective action.”
“As consumers, we make choices when prices are going up,” he said. “I think we do that collectively.”
Usset said the U.S. has been fortunate to be bountiful in food production and being able to put food on the table, relative to other countries where it is a bigger part of their income. But consumers are going to have to start finding ways to deal with the price increases, he said.
“You start to think about it when it costs a lot,” Usset said.

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