Posted on: Sunday, May 9, 2004

Rising fuel prices reduce consumer food budgets

By Ira Dreyfuss
Associated Press

CHICAGO — For financially pressed consumers, it's coming down to a choice between spending on gasoline or groceries, and gasoline is winning, a food industry analysis finds.

"Given the economic environment, it is not surprising that more shoppers are buying food today in discount stores and other low-price venues than ever before," said the report by the Food Marketing Institute, released at the organization's annual trade show in Chicago.

"High oil prices, both at the pump and for home heating, depress consumers' ability to spend more," the study said.

Gasoline prices have been soaring: about 35 cents a gallon since December, driven by surging crude oil prices, according to gasoline industry analyst Trilby Lundberg.

The food industry report said the fuel price increases are tightening the pressure on personal budgets that already were squeezed hard by credit-card bills.

"In 2003, for the second consecutive year, we detected among consumers that minus inflation, they are managing to buy their groceries for less than they did last year," Michael Sansolo, FMI's senior vice president, told the group's opening conference recently.

Consumers feel the financial pain and are acting to ease it by finding cheaper places to spend on food, said the FMI report, citing a survey commissioned by the trade group. The survey of more than 500 people telephoned randomly in January had a margin of error of 4.5 percentage points.

As a result, supermarkets are losing their hold on their customers, who can go to other retailers such as discount stores, the survey said.

The proportion of respondents who said a supermarket was their primary food store fell by 5 percentage points since a year earlier, to 72 percent. The share of shoppers who considered a discount store their first choice rose by 4 percentage points, to 21 percent.

The report also said shoppers are finding other ways to be more careful in their spending.

More shoppers said they were comparison shopping, looking in newspapers for sales, using coupons and rebates, stocking up on bargains even if they don't need the items right away, and buying only what was on their grocery lists.