There's a tug-of-war underway over food prices between the nation's supermarkets and giant food manufacturers including Nestle, Unilever and Kellogg.
The nation's big grocery chains contend that food manufacturers have raised prices too fast and too far, considering large drops in prices for fuel, corn, wheat and other important commodities in recent months.
The food companies disagree and say they are still coping with many rising prices themselves.
At issue are surging wholesale prices for products such as Nestle's Dreyer's Grand Ice Cream, which rose 14% last April. Since then, the price that farmers get for milk -- the main ingredient -- has dropped 36%.
Kraft raised the wholesale price of a box of its staple macaroni and cheese an average of 9% in the last year, according to several supermarket chains, despite 38% to 68% plunges in cheese and wheat prices. These increases factor in the growing practice by the manufacturers of shrinking the weight of the contents without reducing wholesale prices.
The grocers are fuming. One large grocery company operating in Southern California has seen the wholesale price for a carton of Kellogg's Corn Pops rise about 17% since June -- despite a 52% plunge in corn prices from their peak that month.
"It's disingenuous to consumers that all commodity costs are coming down, interest rates are coming down, everything is coming down, and [the national brands] are taking their prices up," Steven Burd, chief executive of Vons owner Safeway Inc., told investors Thursday.
Jeff Noddle, chief executive of Supervalu Inc., described the conflict as "kind of a battleground with manufacturers right now. We are pressing for a reduction in prices."
The costs of the raw goods that go into almost every food product have fallen by substantial amounts, said Jonathan Feeney, an analyst at Janney Montgomery Scott in Philadelphia.
The dropping price of grains "has widespread impact across food. Not only are corn, soybeans and wheat key ingredients in products up and down the snack, cereal, soup, bakery and other aisles, but they also serve as key inputs in commodity protein and dairy production," he wrote in a recent report to investors.
Unilever called the situation "complex," with pricing levels remaining "both volatile and unpredictable in the medium to long term."
Grocers said that Unilever last year increased the wholesale price of its Skippy peanut butter by about a nickel a jar after shrinking the contents of the container by almost 10%.
