The U.S. Department of Agriculture reports that the nation is experiencing a period of grocery cost deflation. STOCK IMAGE

Grocery deflation arrives in Maine

ELLSWORTH — Although you might not feel it in your pocketbook, the cost of most grocery staples decreased in the past quarter.

Nationally, the grocery industry is experiencing a period of deflation the likes of which hasn’t been seen since the 1960s, according to the U.S. Department of Agriculture. Maine is following suit.

“Prices declined overall in 2016, falling 1.3 percent below 2015 levels,” according to a June 26 report from the USDA’s Economic Research Service. “This marks the first annual decline in supermarket prices since 1967.”

The USDA attributed the decline to increased production, lower transportation costs because of deflated oil prices and a strong U.S. dollar.

This supports what was revealed Friday during the newspaper’s quarterly recording and averaging of grocery staples at the Ellsworth Hannaford, Shaw’s Supermarket and Walmart.

In the survey, the two items that did increase in price only did so by 1 percent.

Those items were a pound of 85 percent ground beef and a 12-ounce box of cheerios.

A pound of 85 percent lean ground beef rose from $4.72 a pound to $4.76.

Cheerios also had a modest increase from $3.28 for a 12-ounce box to $3.32.

All the other items recorded, a 16-ounce jar of Skippy peanut butter, a gallon of store brand 2 percent milk, a 16-ounce loaf of store brand white bread, a pound of butter and a dozen large white eggs, decreased.

Grocery deflation means that prices have gone down a little, said Ben Wootten, president of Wind River Capital Management in Ellsworth.

Wootten compared the grocery dip to how oil industry volatility affects the consumer price index (CPI).

“When the CPI goes really up — it’s because of oil being volatile. Then when oil drops 30 percent, the CPI drops,” Wootten said. “I think its analogous.”

Wootten cited the effect that an avian flu outbreak had on the egg industry. Prices had risen dramatically and have now fallen.

At the height of the 2015 Avian flu outbreak, local egg prices reached over $3.25 for a dozen large white. On Friday, a dozen eggs were $1.25 — a 160 percent drop.

Ron Picard, who owns Friends & Family Market, said grocery deflation means profit margins, already narrow in the grocery business, become narrower.

“You do a little closer looking at items you can get a little more margin on,” Picard said. “You have to be smarter. You have to promote better. It’s harder especially when you’re looking at the labor costs that could also go up here. It’s a tough market.”

Picard said shoppers probably don’t recognize grocery deflation.

“If you ask the consumer, they’ll probably tell you no,” he said.

Indeed, The American asked readers on Facebook if they had noticed a decline in the checkout line totals. They have not.

“Certainly doesn’t seem like they have,” said reader Debbie Irish. “I picked up just a few things the other day … not even a half of a cart and it was over $100.”

“Not for me, seems like I spend more and more and get less and less, was at the grocery store just the other day and only brought a few items, not even any meat at all and spent almost $70,” said Annette Babcock. “I think the cost of fruit is especially getting out of hand as well as meat costs.”

Grocer John Bannister, who owns Merrill & Hinckley in Blue Hill, said he isn’t seeing any deflation.

“I can’t imagine anybody’s found a way to make things go down with the landscape we’re in,” Bannister said. “When that minimum wage increase was passed, everyone you spoke to said prices had to go up.”

“It’s a business that’s basically controlled by the biggest players,” Bannister said. “If somebody can buy 50,000 cases of Del Monte corn, they’re going to get a better price than someone who can only buy 100 cases of Del Monte.”

Speaking of biggest players, Amazon’s recent purchase of Whole Foods is expected to make the industry even more competitive.

Another issue affecting the grocery industry and ostensibly decreasing prices is that everyone and his neighboring business is selling groceries.

“More food is sold in more places these days, with pharmacies and dollar stores looking to groceries to lure customers,” stated a recent Bloomberg article titled, “Why the Retail Crisis Could be Coming to Groceries.” “Dollar General alone added more than 900 stores last year, ending 2016 with more than 13,000 locations.”

Dollar General intends to open 1,000 new stores in 2017. One of them is slated for Route 1 in Sullivan.

Also, Bloomberg notes, shoppers aren’t making once weekly trips to the grocery store any more. They are making multiple trips, driven by a demand for fresh food. They’re also shopping at farmers markets.

Jennifer Osborn

Jennifer Osborn

Reporter and columnist at The Ellsworth American
News Reporter Jennifer Osborn covers news and features on the Blue Hill Peninsula and Deer Isle-Stonington. She welcomes tips and story ideas. She also writes the Gone Shopping column. Email Jennifer with your suggestions at [email protected] or call 667-2576.
Jennifer Osborn

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