Shrinking packages, high food prices fluster parents

Kids may be worried about homework, teachers and that pesky bully this school year. But parents? They’re leery about lunches.

With food prices rising and packages shrinking, parents are wondering how they’ll stretch their food budgets. Children are going to get an unwitting lesson in economics, analysts say, as parents change their food-buying habits to keep costs down.

Some kids will eat more hot lunches this year. Some will carry baggies full of snacks like home-packed chips and crackers rather than prepackaged ones. Maybe there will be more peanut butter, if it hasn’t been banned in school because of allergies, instead of lunch meats, or cheaper items like Spam.

This year’s lunchroom will be less about convenience and more about the bottom line, said Marcia Mogelonsky , senior research analyst with Mintel International
in Chicago. Parents will be shopping for deals but still wanting all the basics – fruits, veggies, proteins and fun things like chips and cookies. It won’t be easy, she said.

“Parents are sort of entering this with trepidation,” she said. “It’s not how much it costs. It’s how much more it costs relative to what they’re used to spending.”

The costs for key ingredients – like corn, wheat, soybeans and other items – are high and eating into food companies’ profits. So big names like Kraft Foods Inc., Sara Lee Corp. and Hormel Foods Corp . are passing along price increases as they try to keep making money.

Some companies are also shrinking products or getting rid of certain lines to lower their costs. Kraft is reducing the number and in some cases the size, of items in its Deli Selects cheese line, for example. Sara Lee has reduced the size of some of its Hillshire Farm deli meat packages from 10 ounces to 9 ounces.

The prices, for the most part, don’t go down.

Some stores – like grocery store chain Save-A-Lot – are advising parents on what to buy. The chain, which targets bargain shoppers, has a new campaign telling parents how to make meals like turkey slices wrapped in tortillas that cost about $1 a serving.

In Los Altos, Calif., Hollis Bischoff’s two children have been packing their own lunches for years. It saves money because they know what they’ll eat, she said, and it teaches them a lesson in how to spend and save. Jordana, 12, and Nate, 14, have never bought milk because they think it’s too expensive at school, she said, and they ask teachers if they can use the microwaves in their lounges when they want hot food.

The kids also go and buy food at the stores, or leave a list for their parents if they run out – always with costs in mind, Bischoff said. They get some money from their parents for lunches and if they go over a set amount, it comes out of their allowance. Bischoff said they’d rather save their money for more fun things, like a Nintendo Wii , so they opt to skip the $2 slices of pizza, for example.

“They’ve learned the meaning of saving money and spending money because they’ve seen what’s happened during theears in the stores,” said Bischoff, 49, who owns a yarn shop and works a full-time job as a market analyst.

The cost of food is soaring. In the U.S., retail food prices rose an average of 6 percent this year. That’s three times the normal inflation rate. Prices are rising because companies are paying more for key ingredients, due
to increased demand around the world, the weak U.S. dollar and weather that destroyed crops.

Economists say the high prices won’t be coming down anytime soon. The pinch consumers are feeling is affecting their shopping habits, said Harry Balzer, vice president of consumer research firm NPD Group and an expert on American eating patterns.

“These rising food costs have to be paid for by somebody,” he said. “The question is how are you going to pay for them?

Are you going to pay for them in keeping your out-of-pocket cost constant by buying smaller portions, or are you going to be paying more for what you paid last year?”