WHAT'S GOING on? Washington area supermarkets have frozen prices on several hundred of the 10,000 items they stock.
They are offering double coupons.
They are expanding their lines of generics.
And they are losing some of their business to discount no-frills warehouse-type markets.
All in the name of controlling inflationary costs of food.
Have any of these events really made a difference to Washington-area shoppers, who already pay more for groceries than shoppers almost anywhere else in the country?
According to Esther Peterson, White House consumer adviser and former consumer adviser to Giant Foods, some of the savings are real, some are illusory.
Supermarkets, she says, would be better off if they lowered prices instead of offering coupons.And she's convinced it can be done. "why don't processors reduce prices across the board instead of having coupons?" she asked in an interview last week. Peterson says there are so many "deals and coupons" because of "anticipatory price rises." Afraid of wage and price controls, processors raised their prices, and now they are giving some of those higher-than-normal profits back through manufacturers' deals with the supermarkets and coupons.
Peterson becomes very angry when coupons are mentioned. "it's the stupidity on the part of these gals (who try to buy most of their groceries with coupons) that gets me. They are feeding their families junk. It worries me," she said. "the next thing will be stamps, then who know what. Why not cut prices instead?"
Supermarkets are not wild about coupons either. Giant Foods has prepared a film which explores the problems with coupons, referring to their "wasteful nature and possible illusory benefits." Giant suggests that lower prices "should be an alternative that should be seriously considered."
With couponing there is enormous opportunity for fraud -- redeeming coupons without purchasing the products for which the coupons are intended. There are expenses involved with the handling, and when it comes to double couponing, that extra money comes from the supermarkets, not the manufacturer. "i'm sure some smart merchandizer could figure out how to take that money and make it available for better foods and to the people who don't get coupons." Peterson said, referring to the fact that lower income people have fewer opportunities to get coupons. Besides, Peterson said, "in the end, we pay for it."
But who pays for the price freeze, a freeze which extends almost exclusively to house brand and generic dry goods and canned products? Peterson, who prefers the term "ceiling" to "freeze" -- "because I want to see the prices come down, too," -- isn't certain, though she admits there is some truth to the notion that the processors are the ones who are being squeezed. Discussions with several suppliers of house-brand canned fruits and vegetables confirm this. The processors are angry. Referring to the freeze, one called it "a charade. It's ridiculous to expect us to be frozen at unprofitable levels," he said, noting that prices for last summer's bumper harvest were quite low. "we can't turn to our suppliers, the farmers, and ask them to trim their prices. "the whole thing is just for newspaper consumption, I'm afraid. What they are saying is garbage."
Said another, "it's like putting a Bandaid on a case of terminal cancer. Someone is going to put a freeze on a few items, and we have 18 per cent inflation!"
Despite the fact that many processors think the freeze is just one big public relations job, they were asked if consumers wouldn't benefit. "i think the consumers are going to benefit by it," one said, "but I don't think they are going to know it, because it won't matter a farthing because it's so small."
The chains that announced the freeze for 30 days aren't getting hurt at all, according to the processors. "many of them probably had 30-day inventories on hand.
Peterson has received complaints that some stores pushed prices up before declaring a freeze. She said she thinks some of those complaints "may be ligitimate."
But what about chains like Giant Foods, which announced the freeze for 21 weeks. Someone like that is "taking a little more of a chance," explained another processor. "but it's awfully good publicity for very little cost."
Another expert in the field had another expanation. Giant, she said, has been smarting for the rap on the knuckles it received last year when it was told to roll back prices because its profits were higher than those allowed by the Council on Wage and Price Stability. In the year ending Oct. 1, 1979, Giant's sales increased 15 percent while their net profits were up 65 per cent over the previous year.
Peterson agrees that "giant is still smarting from the previous summer." But whatever the reasons for the freeze, Peterson reacts strongly when it is suggested that such an action is a charade. "you have to start somewhere," she said. "we're going to be in touch with the processors next. It's causing a lot of discussion, a lot of soul searching." Two supermarket executives approached her last week and asked if she would help them draft letters to their stockholders if the dividend checks were smaller because of the companies' cooperation in freezing some prices."
"big firms," she believes, "are realizing that they have to change." That's why many of them are stocking generics. That's why A&P and Grand Union, as well as other large supermarket chains throughout the country, have opened no-frills stores.
Until A&P, the area's third-largest chain, took the plunge and opened its no-frills, limited assortment storess called Plus, the other supermarket chains hardly noticed the existence of the few independent discount markets in this area. But Plus, with eight locations, was a different matter. One chain, Giant, paid particular attention and cut prices in its stores located near the Plus stores.
Two weeks ago the most ambitious limited assortment store, Basics opened in Marlow Heights. You have to stand in line to get in. You have to stand in line to checkout. Why?
Because prices are as advertised. Shoppers can get ". . . up to 30 percent more good food for their dollar." A 55-item market basket cost $66.99 -- a savings of $16.73 over shopping at one of the two largest chains.
A subsidiary of Grand Union, Basics is the first story of its kind in Washington. It offers not only dry goods as does Plus, but meat, poultry, deli and cheese and good fresh produce. It has only about a third of the items found in the traditional supermarket, but it has, as its name implies, all the basics, and 95 percent of them brand name products.
Perhaps Gail Blake, who was shopping at Basics with her husband one morning last week, is an example of the new shopper who has the dominant chains worried.
"i use my coupons at A&P, Safeway and Giant. I usually shop at Plus. Some prices, "she said, "are better at Plus than they are here. I go to Marlin's Annex. Some prices are better there, but the selection is better here. I go to three and four stores every two weeks."
Blake explains that she doesn't work and has time to do that kind of shopping, but her husband notes "the savings she gets at the end of the year are the same as a salary."
So the large supermarkets still get some of Blake's business because of the coupons. But they have lost her business for other goods because she can buy food much cheaper elsewhere.
It's people like Blake who make Peterson think alternative markets will succeed this time. "people are inflation conscious. There's a new sophistication on the part of the consumer," she said. "and I think they're beginning to pinch."