Shop Talk

No tug-of-war between grocers and food makers-Kroger CEO

Costs for ingredients like rice, wheat and oil are falling, so why are prices for breakfast cereals like Rice Krispies and Special K still rising?

If you want an answer to this question, you aren’t the only one.

Food companies like Kellogg Co, which makes the products mentioned above, say the higher prices are justified because while commodity price inflation has eased amid a global economic downturn, commodity prices remain well above historical averages.

But CEOs of grocery chains like Safeway and Kroger say those higher prices are increasingly out of whack with their own lower-priced private label products.

“We have seen some price declines,” Kroger Chief Executive David Dillon said on a conference call, but he said prices for national brands were not in step with a broader fall in commodity costs.