Fuel’s way down, show shoppers the savings!

Articles
October 31, 2008

Fuel’s way down, show shoppers the savings!

If food purchasing was a TV show when oil hit $147 per barrel, The Fear Factor would have been an appropriate title. How high would prices rise? Could you feed all your kids, or would you have to go hungry so they could eat? Could you buy napkins too, or simply wipe your face with your left arm? What the heck, you’re eating at home anyway. Pretty gritty. Now that oil has plummeted to the $60 per barrel range, with some experts estimating the true cost to pump it from the ground is only around $20 (more room to fall, is their position), the TV show might be called Show Me The Money, as in savings. The show’s premise: how long will it take before CPG manufacturers and retailers lower their prices since their own transportation costs (the reason for the price surges of the past year) have fallen. Will they try to hoard their gains? Will they face backlash from trading partners and consumers? How loudly will the public demand price drops? Right now in real life, there’s lots of finger pointing. Chains at manufacturers. Manufacturers at their suppliers. Consumers at both.

If food purchasing was a TV show when oil hit $147 per barrel, The Fear Factor would have been an appropriate title. How high would prices rise? Could you feed all your kids, or would you have to go hungry so they could eat? Could you buy napkins too, or simply wipe your face with your left arm? What the heck, you’re eating at home anyway. Pretty gritty.

Now that oil has plummeted to the $60 per barrel range, with some experts estimating the true cost to pump it from the ground is only around $20 (more room to fall, is their position), the TV show might be called Show Me The Money, as in savings. The show’s premise: how long will it take before CPG manufacturers and retailers lower their prices since their own transportation costs (the reason for the price surges of the past year) have fallen. Will they try to hoard their gains? Will they face backlash from trading partners and consumers? How loudly will the public demand price drops?

Right now in real life, there’s lots of finger pointing. Chains at manufacturers. Manufacturers at their suppliers. Consumers at both.

And there’s a reality check.  Energy costs are still 23% higher than a year ago, said The Patriot-News, citing federal figures.  Prices for key food commodities—such as corn, soybeans and wheat—are more than double what they were two years ago, Patricia Novosel, a global food leader for Ernst & Young LLP told the newspaper.

So permanent price drops are probably premature.

But SupermarketGuru.com believes that more promotions that provide consumers with some relief are not only in order now, but rightfully expected. It seems likely to us that the first brands and retailers to move aggressively in this direction will earn some holiday cheers of appreciation, and probably some new trials and customers. This is not a time to hesitate when people are about to clamor for some savings action.