Call it the Great Grocery-Store Giveaway of 2016.
In Austin, Texas, Randalls slashed prices for boneless beef ribs by 40 percent, to $3.99 a pound. Not to be outdone, the H-E-B grocer down the street charged $1 a pound less.
And what does $1 buy these days? In North Bergen, N.J., you could pick up a dozen eggs at Wal-Mart. A year ago you would have paid, on average, three times that price.
In a startling development, U.S. food prices have fallen for nine straight months. It’s the longest streak of food deflation since 1960 — with the exception of 2009, when the financial crisis was winding down. Analysts credit low oil and grain prices, as well as cutthroat competition from discounters. Consumers are winning out; grocery chains, not so much.
“The severity of what we’re seeing is completely unprecedented,” said Scott Mushkin, an analyst at Wolfe Research who has studied grocery prices for more than 10 years.
At first, falling prices helped grocers. Low-cost commodities pushed down the tab for meat and packaged food and boosted profits. Now, deflation has turned ugly for them. Led by Wal-Mart, retailers are pushing down prices, eating away at their profit margins.
“It starts to border on irrational pricing,” said Jennifer Bartashus, an analyst at Bloomberg Intelligence. “People are lowering prices just to draw traffic, without thinking about their margins.”
In recent years, Kroger — the largest U.S. grocery store chain — cut prices to compete with Wal-Mart and managed to increase its market share and sales. But deflation has been hard on the chain. Kroger’s stock has lost more than a quarter of its value this year, as price cuts weighed on profits. CEO Rodney McMullen said many customers don’t even notice.
“The other thing that’s always hard is getting your message out, because it’s fascinating — in our research, most people are saying their basket of goods costs more money,” McMullen said earlier in September.
The likely reason for McMullen’s lament: Food, on average, makes up only about 15 percent of a consumer’s budget. Except for gas and other energy-related items, prices for most other goods (and restaurant food as well) are going up.
Elena Rosa, 63, a retired health aide, was blasé when she steered her shopping cart past the refrigerator case at an Aldi in New Jersey. She paused, noting a dozen eggs for less than $1 — one of the great food deals of recent memory.
“That’s a good price,” she said, before moving on without buying a carton.