Denver Post, April 6, 2008: Price disparity in groceries
By David Migoya
The Denver Post
Article Last Updated: 04/06/2008 10:02:31 AM MDT
It’s not cheap being poor.
Few places reflect that reality more than the aisles of a grocery store, where prices seemingly increase daily as the economy teeters toward recession.
“It’s not very easy to make do right now,” said Kathryn White, a 58-year-old disabled nurse who relies on a small food-stamp stipend to offset high grocery costs.
“I just can’t look to buy something that costs $2,” she said. “I have my limits.”
Those limits are stretched even more when food-stamp recipients like White find higher prices at their local supermarket for the same items that are less expensive within the same chain, but in a more-affluent neighborhood across town.
“I’ve learned through the years to stay out of certain neighborhoods,” White said, referring not to street crime but to shelf price. “The wealthier the neighborhood, the more it will cost.”
Not exactly so, according to a Denver Post review of grocery items priced over a four-visit shopping trip between September and January to eight stores in four chains.
Stores that cater more to the lower-income shoppers many of them recipients of government benefits such as food stamps on average didn’t provide lower prices than stores in areas whose shoppers are better off, the review found.
And when differences were noted, they tended to favor the affluent areas, meaning lower-income customers generally paid more for the same bag of groceries purchased closer to home.
“If you don’t have the money to shop at a particular store, you’re stuck,” said Rita Fish, a mother of three who frequents the same two stores for her groceries. “And if you don’t have a ride, then you’re stuck even more.”
On the same day, the grocery tab could be up to 20 percent more expensive on a visit to a store serving food-stamp users than at its counterpart in a more-affluent neighborhood, The Post found.
For example, a standard 12-item basket of groceries priced the same day at two different Safeway stores one on East 20th Avenue near downtown and the other in Cherry Creek cost $26.34 and $22.13, respectively.
But when all the trips to all the stores were averaged together, the bill was just 4 percent higher at stores where food-stamp users shopped most.
Still, for a three-person family receiving the maximum $426 in monthly food-stamp benefits, that’s a difference of $205 a year.
And when a discount is tied to a retailer’s frequent-shopper card where only members can obtain an item’s sale price is removed, the difference can be even more dramatic.
Fewer choices for poor
Eating well can be expensive. Eating healthy isn’t much cheaper.
“I have to live off the markdown racks for meat and canned goods, some deli items,” White said. “I seldom ever buy meat out of the regular counter. It’s just too much money, and I don’t have it.”
Advocates for the those living on food stamps say it costs more to be poor simply because the choices are not as varied, whether it’s among the items that stock store shelves or the stores themselves.
A store in a neighborhood without any competitor of like size is unimpeded in its pricing, according to several grocery chain representatives.
Retailers explained the price differences as driven by competition or the lack of it and dismissed any notion that high prices purposely correlated with income.
“Kmart prides itself on serving a diverse customer base and in no way uses customer income to determine unit pricing at any of our store locations across the country,” said Kimberly Freely, spokeswoman for Sears Holdings Corp., which owns Kmart.
A King Soopers executive said there should be no difference in prices from one store to the next in the Denver area and expressed surprise at The Post’s results.
“It’s supposed to cost the same from store to store,” said Katie Wolfram, the chain’s vice president of merchandising. “That is not supposed to happen.”
Not all the stores serving low-income areas were free of a nearby competitor, a check by The Post found.
The King Soopers on Sheridan Boulevard in Edgewater has an Albertson’s a few blocks away; the Kmart on East Colfax Avenue near Interstate 225 in Aurora has a King Soopers right across the street; and the Safeway on 20th Avenue has a King Soopers nine blocks away.
Advocates for the poor were less concerned with why prices were disparate, just that they were, especially within the same chain.
“For some reason, I would have thought that stores located in low-income neighborhoods were pricing identically to the others in the chain,” said Kathy White, project director for the Colorado Fiscal Policy Institute, and who is not related to shopper Kathryn White. “It’s disheartening.”
Prices on the rise
The Post shopped for 11 items apples, bananas, oatmeal, cold cereal, milk, eggs, sugar, bread, flour, bologna, macaroni and cheese and ground beef. The items were selected based on their staple nature and likelihood of being purchased by someone regardless of income level.
The stores King Soopers, Safe way, Wal-Mart and Kmart were chosen according to neighborhood demographics and volume of food-stamp redemption.
Only one major chain Albertson’s was not included because one of the stores in The Post’s review closed midway through the sampling.
The price tag of a typical shopping trip the lowest available price for each of the 11 items plus ground beef sometimes increased more rapidly over time at stores whose customers were more likely to be food-stamp recipients than at other stores.
For instance, the basket of 11 items, excluding ground beef, purchased at a downtown Safeway with a high number of food-stamp shoppers increased by 7.4 percent $20.69 to $22.22 from the first shopping trip The Post made in September to the last one in late January.
Prices for the same array of items at the Safeway store serving the Cherry Creek area rose by only 5.8 percent for the same time period $21.68 to $22.93.
And though Wal-Mart stores had the lowest prices in the survey overall, they fluctuated more frequently. Prices at its Smith Road-Stapleton store, where more food-stamp customers shopped, tended to be higher than its Centennial store.
Ground beef prices varied greatly from store to store and week to week, affecting the final cost of the grocery basket. That’s because stores serving more-affluent neighborhoods at times did not carry the less expensive, fattier beef, while their lower-income counterparts sometimes lacked the more expensive, leaner meat. For that reason, beef is included in some totals and not others.
Some of The Post’s other findings:
• Not counting ground beef, the cost of an 11-item basket actually decreased by 3 percent at the Kmart store in Aurora, popular among food-stamp shoppers, and by 3.4 percent at its Englewood store on West Belleview Avenue near South Broadway, the only stores surveyed with a price decline over the four shopping trips.
The prices at both stores increased by slightly more than 1 percent when the cost of ground beef was added.
• Prices increased by 10.8 percent over the four trips at the Smith Road Wal-Mart when the cost of ground beef was factored in, highest among all the surveyed stores.
• The lowest complete basket price among all the stores during any of the four visits was $18.74 at Wal-Mart in Centennial. The highest was $27.50, at the Greenwood Village King Soopers at South Holly Street and East Orchard Road.
• Some items had no price on display, leaving customers to purchase blindly or find a scanner to do their own price check.
• Some “sale” prices were actually the regular price from a previous visit masking a price increase. For example, the regular price of a pound of Gala apples was $1.28 at the Safeway on 20th Avenue on Sept. 19. The following visit, on Oct. 5, the regular price was $1.99 a pound, but the apples were on “sale” for $1.28.
Then, on Jan. 11, the apples were regularly priced at $1.99 a pound.
“Fiercely competitive”
Pennies can make a difference to shoppers, Safeway spokeswoman Kris Staaf conceded, but “the grocery business is fiercely competitive.”
“The goal is to maintain consistent prices,” Staaf said. “There’s some fluctuation here and there, but it’s all driven by competition.”
Industry experts said they doubted retail prices are intentionally raised to coincide with the distribution of food stamps.
“I don’t subscribe to any logic that retailers target the poor deliberately, or introduce errors into the scanner system or any other game,” said Edgar Dworsky, founder of Consumer World and a former assistant attorney general.
“The ethical question of whether lower prices should be in lower-income areas is a little too goody-two-shoes,” he said.
Nevertheless, disparities do exist.
On a shopping trip on Jan. 11, The Post found that prices on six items at the Smith Road Wal-Mart near the Stapleton development were more expensive than at the Wal-Mart in Centennial and 10 items at the Smith Road store had increased in price from a previous visit there.
Over all four shopping trips, items at the Smith Road store were more expensive 23 times than the same products at the Centennial-based Wal-Mart, where items were more expensive than the Smith Road store eight times.
Officials at Wal-Mart said the discrepancies are minor.
“I think it’s fair to say that our prices were the same at both stores most of the time, or at least more often than not,” said Bill Wertz, Wal-Mart’s division director of public affairs. “Both Stapleton and Centennial modify prices to reflect local competition.”
Competition is key to store pricing, experts say. If a store has no opposition, then prices can fly unchecked.
“A Safeway next to a King Soopers would keep competitive pressure high and prices down,” said Rick Shea, president of Shea Marketing and an expert on retail grocery operations. “But a Safeway with no competitor for 10 miles is the only game in town and could have higher prices.”
And the cost of groceries is rising as the price of wheat and corn hits heights unseen in years. The price of U.S. wheat, for example, has more than tripled in the past 10 months. That means the price of bread is shooting up.
What’s driving the surge? Poor wheat harvests in foreign markets such as Australia and parts of Europe are causing countries that rely on them to buy up American supplies, now even more appealing with the sagging dollar.
Add to that the U.S. government’s incentives for growers to plant more corn specifically for ethanol production and suddenly demand exceeds supply. Then there’s the surging price of gasoline and diesel, putting even greater pressure on the demand for alternative fuels.
And there’s little sign of a letup.
New federal estimates place the number of food-stamp recipients at 28 million people by year’s end the most since the program began in the 1960s.
Said Shea: “The bottom line, from retailers to consumers, is it’s capitalism, good or bad.”