Cartoon by Steve Kelly
The Consumer Price Index for September was released last week. It contained data that most consumers and retailers already knew: prices are up and sales are flat. Specifics for the food industry included a .5% drop at eating and drinking places and a .5% drop at food stores. Food prices, however, rose .2% from August.
The economic crisis, centered on credit issues, has affected at least one major food producer. The Pilgrim's Pride Corporation says that it is nearing having to declare bankruptcy due to the tightening of credit lines. The Wall Street Journal reports:
Amid a near-frozen credit market, Pilgrim's Pride now finds itself grasping for a lifeline. A troupe of bankers is trying to restructure the company and refinance its debt -- something that might have been more feasible during the era of easy credit just two years ago. But, like many other companies hoping to refinance, Pilgrim's Pride is discovering that banks have gotten a lot tougher about lending. Compounding its difficulties, some suppliers are demanding new payment terms, such as payment on delivery or even in advance.Suppliers and consumers are struggling alike with the current economy, and both are forced to make changes to stay afloat. Many restaurant chains will have to resort to raising prices and cutting back or restructuring value menu items. MSNBC has the story:
The decision to raise prices or change menus could have some harsh repercussions, especially because more diners are already eating at home to avoid pricey restaurant food. With the stock market dropping and consumers questioning whether their retirement savings will be available when the time comes, paying more for a meal out may be even harder to stomach. But for restaurateurs, there may not be much of a choice.The New York Times has a great article about spending habits of consumers in time of economic hardships:
"This is the most challenging environment for restaurant operators regarding food price inflation on the wholesale level for almost 30 years," said Hudson Riehle, senior vice president of research at the National Restaurant Association.
DURING a recession, laxatives go up, because people are under tremendous stress, and holding themselves back,” said Mr. Shapiro, now chief executive of SAGE, a Chicago-based consulting firm. “During a boom, deodorant sales go up, because people are out dancing around. When people have less money, they buy more of the things that have less water in them, things that are not so perishable. Instead of lettuce and steak and fruit, it’s rice and beans and grain and pasta. Except this time the price of pasta’s so high that it’s beans and rice.Do you feel like we are already in a recession? What are your plans to stay afloat until the economy has stabilized? Comment below.
Further Reading:
Newsleader.com on Families Grappling with Higher Food Costs
The Wall Street Journal on the Consumer Price Index
Seeking Alpha on The Relationship Between Food and Energy Prices
