The president's inflation fighter, Alfred Kahn, wants the public to do a little sleuthing to expose price gouging.
The idea, unveiled at the White House last week, is to spotlight price increases which violate the administration's voluntary wage-price guidelines, in the hope that, violaters will be coerced into rescinding some of the increases or consumers will be inspired to buy from alternate sources.
Perhaps no-frills grocery products are to be considered alternative sources. White the cost of national brands has risen sharply, anyone who has been price-watching since last summer, when no-frills, or generic grocery products debuted in the Washington area, probably knows these generic products have risen much less in the eight-month period and may turn out to be an even greater bargain than they were when they were first introduced.
A&P was the first to offer generics - or noname products - here and has continued to expand the original 14 items to about 30. It includes canned foods, paper and cleaning products and dog food. From the beginning generics have been priced substantially below name brand products and A&P's own house brand items, most of which are sold under the Ann Page label. But the margin between the generics and national brands has widened appreciably in the last months, according to a sampling taken by The Washington Post last week at A&P.
While the average price of the 14 generics available in June has risen 3.55 percent, the cost of the name brand equivalents has increased 9.8 percent.
There are as many different explanations for the increased price differential as there are people explaining it. All of them may be valid; none seems to be the complete answer, probably because as Victor Hirsch of the Food Marketing Institute said; "It isn't easy."
The vice-president and general manager of A&P's Baltimore-Washington division, Paul Stillwell, says "lower gross margins" on the generics could account for the increased price differential. "Our costs have increased substantially since June on some items, and we have lower margins than we had in June. We had to absorb costs in some of these items," Stillwell said. "Generics are a traffic item that attracts customers to our stores, and we want to be more than competitive."
At the same time, Stillwell said, there have been "a greater number of price increases since June" than usual on national brand items. "This was especially true from October through February. However, price increases appeared to abate on national brands since February."
Stillwell refused to comment on a theory putforth by Bruce Marion, an economics professor at the University of Wisconsin, who blames the larger than usual number of price increases on the threat of wage-price controls: "My guess on it, without any factual data, is that the name brands are put out by large food manufacturers who recognized that if wage-price controls come along they are going to get hit with them. Therefore, they may be more anxious to protect themselves, and are raising prices in anticipation of wage-price controls. Smaller manufacturers, who might be putting out generics, might not be as likely to be hit with wage-price controls."
Marion is also an authority on the effect concentrated markets have on the cost of groceries. According to a study he and Dr. Willard Mueller did for the Congressional Joint Economic Committee a few years ago, Washington is a concentrated market because two chains control over 60 percent of the grocery sales and four chains control over 80 percent.
Marion says, "It's possible a retailer would raise the prices on his national brands to keep generics low. In a very concentrated market like Washington, one thing you do tend to find is a heavier use of private labels or generics for advertising, to convey the image to consumers [that] you are competing on price. But there is a real reluctance to compete head to head with national brands. In a more competitive market you find more competition in national brands."
A&P denies it would "raise the price on one item to justify the price on others."
But one official of a local wholesale grocery firm said the difference in increases between the national brands and the generics could be due to a combination of things, the most important of which is the method by which generics are bought.
According to this wholesaler, "Most generics are packed under contract. You contract for so much at such-and-such a price and you don't have the continual fluctuations of prices. You contract for a set price.
"What you would have to do," he says, "is look at generics in a full year cycle. You might see a full year's effect at one time instead of various times within one year."
But FMI's Hirsch, whose organization looks after the interests of food retailers and wholesalers doesn't think the results of the survey are particularly useful. "There is an intrinsic problem," he says, "because the sampling is so small."
Whatever the reasons for the increased price differential, no-frills products - whether brandless generics, like those at A&P, or Scotch Brand items (Safeway's second-quality house brand) appear to be exactly the kind of money-saving purchases Esther Peterson had in mind when she announced the publication of a monthly National Consumer Buying Alert last week.
Peterson, the White Hose consumer adviser, joined Kahn at the press briefing to announce the two-pronged consumer involvement to help the administration fight inflation. While Kahn and the Council on Wage and Price Stability have enlisted the aid of the AFL-CIO and some consumer groups to monitor "specific prices in specific places," the kind of information which Kahn says "is very hard to get in Washington," Peterson's office is offering information which she said will help consumers "to cope better with inflation."
The buying alert suggests that if people "comparison-shop, ask the right questions before they buy, and make slight changes in their usual purchasing patterns, these changes, taken together, can help to stabilize the price of many products and services." CAPTION: Illustrations 1, 2, no caption