Buying groceries in Sonoma County takes a bigger bite out of your budget

For waitress Lena Sheridan, who lives in Cotati with her 4-year-old son, the sharp increase in food prices means eating more fast food.

“It’s easier sometimes to get a $1 meal at McDonald’s than to be able to go into the grocery store to spend $15 to have one meal,” Sheridan said.

Also, to help keep her weekly grocery budget from ballooning, she’s now buying more processed packaged foods, and she’s not happy about it.

“You’re buying more stuff that’s not as good for you just because it’s cheaper,” said Sheridan, who watches every penny she spends on food and worries grocery prices could take a while to stabilize.

While the economy recovers from the pandemic, consumers in Sonoma County and across the country shopping at independent grocers and supermarkets are essentially picking up the tab for a slew of price hikes occurring along the stressed food supply chain. They are built into the cost of foods people buy at the store, causing the pain of sticker shock for many consumers.

It’s costing them hundreds of extra dollars for groceries, experts say.

The prices shoppers are paying at the store checkout also are inflated by increased fuel and other transportation costs to get products to grocers, labor shortages affecting food producers’ factories and distributors trying to hire more truck drivers, plus farmers’ bigger bill for corn and soybeans to feed their animals.

“It’s a confluence of all of those things creating these price increases” that producers, distributors and grocers are passing on to consumers, veteran food industry analyst Phil Lempert said.

“Everything along the food supply chain from farms to supermarkets are experiencing price increases.”

In a way, the food-buying conundrum of a year ago in the throes of the pandemic has returned, but with a pricing rather than supply challenge for shoppers.

Last year under a public health lockdown, many people bombarded grocers buying weeks’ worth of food and paper products at once, clearing store shelves to hoard items from pasta to toilet paper at home.

Now, for the most part, there’s plenty of food to buy. However, the price tags on everything from meats and cheeses to cereal and other perishables have been escalating even more this spring, straining residents’ grocery budgets.

Some of the biggest price boosts are on beef, chicken and pork and food industry operators and analysts say it could be sometime next year before the pricing volatility eases. Major U.S. meatpackers are still only operating at half capacity, at best, food industry experts say.

County residents are spending an estimated $5,280 a year on groceries for the average household, or $350 more than in 2019 before the pandemic, according to annualized May consumer expenditure data from the U.S. Bureau of Labor Statistics.

However, many area consumers likely spend far more than that at the supermarket because the government figures are only an average, don’t account for personal spending habits and aren’t adjusted for seasonal purchases. The figures also are for the broad West region that includes Sonoma County, but they are the best representation for average food shopping expenses, said Matt Insco, a bureau economist based in San Francisco.

Chasing elusive profit

Tara Carter, a teacher from Penngrove, said she’s spending about $250 a week on groceries, around $50 more weekly since January.

“I’m definitely comparing what I’m buying and determining the brand I buy based on price,” said Carter, a mother of two daughters, as she loaded bags of groceries into the back of her car she bought at Oliver’s Market in Cotati.

Although consumers are taking the brunt of food inflation, grocers, particularly independents that don’t have the daily shopping traffic and vast selling space that chain supermarkets do, are getting pinched, too.

Dean Molsberry, third-generation co-owner of Larkfield’s Molsberry Market, said the wholesale price of beef has soared about 40% in three months.

After the market passed on price increases on beef, from steaks to ground beef, to shoppers to offset some but not all of that inflation, “I’m not making any money on hamburger anymore,” said Molsberry, who owns the market with brothers Brian and Joe.

On top of wholesale price increases “across the board,” he said, the market is contending with a gas surcharge on food deliveries and supply chain kinks causing typically 20% of items ordered to be temporarily not available.

Saying this is the most challenging time he can recall in his 30 years in the food business, “grocery margins being thin, you have to make up for it,” Dean Molsberry said, of raising prices. “If you make 1% (net profit), you’re doing good.”

Joe Butwill, general manager of Pacific Market in Santa Rosa that has a sister store in Sebastopol, agreed the pricing pressure has been most pronounced on meats.

“We’re not passing along the full amount of it to shoppers,” Butwill said. “We’re eating some of it.”

He’s also seeing slightly reduced quantity of certain foods in individual packages, as food producers grapple with greater packaging costs. It’s also a tactic for food producers to produce less without cutting the prices of foods in somewhat smaller packages.

Butwill continues to face spot shortages, too. The latest has been Gatorade, some canned cat food and pickles.

“The weird one is I haven’t been able to get Gatorade” the last two or three weeks, he said. “I can’t get any of it right now and don’t know why.”

Disproportionate effect

The reopening of the economy locally and nationwide, and the strong consumer demand accompanying it, is contributing to inflation on a wide range of goods including food, experts say.

“As we emerge from the global pandemic and the nationwide shortage of workers amid a growing drought in California, the food industry is one of many sectors facing supply chains stretched to their limits as demand increases with reopening,” said Scott Gross. He’s the general manager of Oliver’s Market, a regional employee-owned grocer with four stores in Sonoma County.

As a result, the May consumer price index jumped 5% from a year earlier, the fastest pace since shortly before the 2008-09 financial crisis, according to the most recent report from Bureau of Labor Statistics, an arm of the U.S. Department of Labor.

Producer prices, among them for foods, rose at their fastest annual clip last month in nearly 11 years, the bureau reported. That increase in the producer price index, which measures average changes in prices received by domestic goods producers for their products, was mostly due to additional costs to process meats, poultry, fish, eggs and cereal.

The 6.6% surge was the biggest 12-month jump in the index since the Labor Department began tracking the data in November 2010.

Ron Fong, CEO of the California Grocers Association, said there’s really nothing grocery store operators can do to alter the prices of products coming into stores.

However, grocers have been absorbing much of the inflation on staples like eggs, bread and milk “to stay competitive with the store down the street,” Fong said, while passing to consumers price hikes in all the other major food categories like meats, canned and baked goods, cereals and toilet paper.

“It does affect low-income shoppers disproportionately, because the money they get in public assistance isn’t growing,” he said.

Surging demand

George Parisi runs Mike Hudson Distributing in Petaluma, a distributor of beef, pork, poultry, deli meats, cheeses and related dairy products to independent grocers, cafes, sandwich and pizza shops in Northern California.

“There’s a lot of pent-up demand out there” for food, he said, and “it’s going to take a while for supplies to meet up with it.”

The trickle-down effect starting with producers in need of more workers to make more food and containers to transport it coast-to-coast in the U.S., hikes prices for distributors who in turn boost costs for grocers.

Hudson is contending with 5% to 8% increases in May and June in overall cost of foods the company is buying from producers to sell to independent grocery stores and small eateries.

“We pass most of it down to our customers,” Parisi said, noting like grocers distributors have thin profit margins.

He thinks the grocery supply chain will improve at the end of the summer and could be back to normal by the end of the year.

$5 for bread

Petaluma retiree Laureen Burke said she and her husband can afford the inflated food prices. She didn’t mince words, though, when explaining her exasperation paying the bloated costs for the foods they enjoy.

“A few things really stand out regarding price increases and number one is bread,” said Burke, after finishing a recent shopping trip to Petaluma Market. “I’ve been paying $5 for a loaf of bread. I never thought I would see a loaf of bread at that price, ever.”

Despite price bumps, she said, the size of a loaf of bread has shrunk and so she’s paying more for smaller slices. And the price of cheese she buys has gone up as well.

“The price increases are ridiculous,” Burke said. “I understand it’s a supply chain issue and grocery stores are struggling, too. ... But it ends up with consumers having to pay much more.”

Chris Pike of Santa Rosa who works as a receptionist for Kaiser Permanente, said grocery price jumps his wallet has been absorbing have been extreme, notably on milk and fresh fruit.

As gas prices soar along with food costs, Pike is considering changing his shopping habits at the grocery store.

“I buy for myself, so I buy in small quantities, but now I’m starting to think maybe I should buy in bulk cause each week it continues. The prices keep going up and up and up,” he said.

In this costly climate, shoppers who want to know where they can get some price relief on grocery bills or how much certain items cost across several grocers, they could use a coupon aggregator app like Flipp or a price-comparison app like Basket, which also includes online prices.

Amy Lash of Santa Rosa, who works as a caregiver, said her 14-year-old son James likes chicken and beef, but with both up $1 or $2 a pound, she’s trying to get him to adapt.

Already, she’s switched to usually buying ground turkey instead of ground beef to stretch her grocery budget. She’s even thinking maybe she can get him to eat bean burritos.

“I try to buy less and I’m trying to get my son to eat something besides meat,” said Lash, after buying a few things at Lucky supermarket.

Clothes or food?

Meat prices will remain high until JBS USA, which produces nearly a quarter of America’s beef, and major poultry and pork processor Tyson Foods replace humans almost entirely on the factory floor with automation and robotics to boost production capacity to pre-pandemic levels, Lempert said.

He’s been in the food business four decades and is founder and editor of SupermarketGuru.com, an information provider for the broad food industry.

“Around the United States, meatpacking plants are not much different than when Upton Sinclair wrote ‘The Jungle’ in 1906,” Lempert said, stressing the dire need for upgrades to the labor-intensive work people are doing on the production line. “We really need to rethink how we process that ground beef.”

Besides converting manual processing to automated technology, meatpackers should build smaller factories across the country to reduce the need for long-haul transportation of finished products, and thereby cut fuel and delivery costs, he said. Also, they need to bolster their cybersecurity to protect against costly cyberattacks, like the one that disrupted JBS North American and Australian operations early this month and cost the world’s biggest meatpacker $11 million in ransom.

Overall, the largest meat processors face an investment of hundreds of millions of dollars to modernize factories. If they accelerate ongoing innovation efforts to do this quicker, Lempert predicted they could return to 100% production capacity by the middle of 2022. When that happens, he said, it will translate to price stability again for consumers buying at the market meat counter.

Meanwhile, Sheridan, the Cotati food server who grew up in Petaluma, will continue struggling to put healthy food on the table for her toddler son.

“You have to shift around money, not spend so much on clothes or not spend so much on other necessities ... to be able to afford food,” she said.

You can reach Staff Writer Paul Bomberger at 707-521-5246 or paul.bomberger@pressdemocrat.com. On Twitter @BiznewsPaulB.