Sticker shock at the supermarket

U.S. families use ingenuity and belt-tightening to save on mounting grocery bills.

Tonya Brown never used to mess much with coupons and in-store "10 for $10" sales. But over the weekend, this mom from Decatur, Ga., came armed to the Kroger grocery store with a fistful of store coupons and sent her kids, Jordan and Nia, out into the aisles in search of bargains.

"Just in the last week I've started paying attention," says Ms. Brown. "My main thing is to make sure we eat healthy foods, and those are the ones getting really expensive. It's becoming a real challenge. If we could save $200 a month on groceries, that's major for us right now."

Like tens of millions of Americans across the income spectrum, Brown's checkbook is feeling the vise grip of rising prices, tighter credit, and stagnant paychecks.

With food prices up 6 percent from last year – flour alone has gone up 87 percent – and gasoline prices up by more than a dollar since 2006, the receipts are adding up, causing a "dramatic" shift in kitchen-table decisions from Albuquerque to Atlanta, says Maura Daly, a spokeswoman for the charitable hunger-relief organization America's Second Harvest in Chicago.

The struggle to put healthy food on the table is tough enough as meat, egg, and veggie prices are rising fastest. But a 15 percent increase in soup-kitchen lines nationwide since last year indicates that many families are struggling to put any food at all on the table.

New evidence of the difficulty: 1.5 million more people use food stamps than a year ago, a 5.7 percent increase, according to the US Department of Agriculture.

At the same time, Americans are trying to stash more money away in savings – indicating a "scrounge" reaction as families dig deeper into their cupboards. Taking place over bins of oranges and stacks of canned soup, this may be the century's biggest test so far of America's consumer resiliency – and inventiveness.

"The American consumer is facing change, and that's always upsetting," says Herbert Rotfeld, editor of the Journal of Consumer Affairs in Auburn, Ala. "Change is confusion, but is it harmful? It's too early to tell."

Evidence of a grocery-aisle mind shift is clear. Coupon-clipping has reversed a 16-year-slide, driven by Internet "clipping" and sites devoted to spotting in-store sales. Americans clipped 100 million more coupons in 2007 than the previous year, a 6 percent increase, according to NCH Marketing.

"Grocery spending has the most wiggle room of any disposable expenditure, so if a family can save $400 a month, that's major in an average family's budget," says Atlanta shopping expert Stephanie Nelson, who has seen traffic on her couponmom.com website double in the last year.

Meanwhile, discount retailers are doing bang-up business. Wal-mart's stock price hit a four-year high last week on the heels of increased spending on, among other things, groceries. Costco's sales are up 9 percent from last year, and BJ's has reported a 13.4 percent sales increase in the last year, much of it attributable to food sales.

Local grocery stores are trying to undercut the big-box retailers as best they can. Both Publix and Kroger in Atlanta were offering penny rolls of toilet tissue this week to try to bring shoppers in. The stripped-down, cut-rate German grocery store Aldi, with about 850 outlets in the US, is moving rapidly to suck up sticker-shocked consumers. A May circular featured bacon-wrapped filet mignon for $1.99 apiece.

At the same time, the restaurant industry is seeing customer numbers drop even as some restaurants are raising menu prices or reducing portion sizes to balance their own inventories and cost. Sixty-one percent of restaurant owners in a recent survey say their sales numbers are sliding even as the industry faced flour costs going up by 78 percent, the cost of eggs up by 73, and cooking oil up 49 percent, according to Annika Stensson of the National Restaurant Association.

At a conference in Phoenix last week, the Nielsen marketing company told consumer packaged goods companies that recessionary spending habits by Americans are forcing producers and retailers to adjust their strategies on the fly as grocery store competition heats up.

"Consumers are feeling the squeeze as they are caught between rising costs and lower spending power," Eugene Roytburg, managing director of Nielsen, told the conference. "As a result, many consumers are reprioritizing or altogether changing their spending habits."

Kroger clerk Grady Thompson says prices are "the worst I've ever seen them," as usually choosy, upscale customers empty out the "10 for $10 bins" of canned foods in midtown Atlanta.

In Camden, Ala., where the median income is $16,646, Nelda Hunter is in full scrimp-and-scrounge mode. "It's very simple, just changing a few habits," says Ms. Hunter, a clerk at Loftin's Bait Shop, in a phone interview. "You don't go to the grocery store hungry to start with. And it's basically doing a menu situation about getting a list and buying nothing but what is on the list."

Just in the last month, Atlanta mom Tammy Heath started inspecting the Sunday circulars and shops accordingly. "These days, I go where the sales are at," says Ms. Heath.

Larger families may be feeling the pinch the most, says Maureen Doyle, executive director of Moms of Super Twins (MOST), an advocacy group in East Islip, N.Y. One family with triplets and both parents working lost their home to foreclosure and are now living in a national park in Georgia, she says.

"Milk, veggies, fruit, rice, all have gone through the roof," says Ms. Doyle. "No working mother should have to cook on Friday night, so we used to always order three pizzas for the household. That is out of our budget now."

"Families in crisis don't look toward tomorrow, they're just trying to get through today, and that's pretty much what I'm hearing," she adds.

One paradox is that poorer families in rural areas – who would seem most susceptible to higher gas prices – may in some cases feel the least pain in tight times.

"You'd be amazed how when you're so steeped in not having much already things haven't changed that much," says Delon Charley in Gee's Bend, Ala. "But everything is being affected to some extent. Instead of buying a big 10-pound block of ground beef, let's just go with five pounds and stretch the Hamburger Helper."

Globalization can complicate today's domestic supermarket situation. For example, booming overseas markets mean that US pork producers are seeing a windfall of exports – especially with a weak dollar – even as American consumers harumph at the meat counter.

"We're in a global environment, and you see more and different kinds of adjustments than if you just looked at the domestic market," says economist Helen Jensen, at Iowa State University in Ames.

Congress has boosted food subsidies to the poor from $140 million to $250 million as part of the 2008 farm bill. Those extra commodities soon will start hitting near-empty soup-kitchen cupboards.

But according to Ms. Nelson, the Atlanta shopping guru, a more immediate way most shoppers can save money is by being less wasteful. Depending on income class, American households throw away an average of 10 to 40 percent of the food they buy, according to a USDA study.

Are people changing their eating habits as a result? It's hard to know for sure, but there is anecdotal evidence.

"When you hit times of recession, people sometimes actually spend more money on food for home, including luxury food categories like ice cream," says Ron Wilcox, a business professor at the University of Virginia in Charlottesville. "What happens is people substitute a little treat at home for going out to a movie or dinner."

Some experts see at least a bit of an upside to today's grocery struggles.

"Economizing often makes you healthier," says economist Peter Morici at the University of Maryland. "In a recession, for example, people tend to move from rich fatty breakfasts toward cereals."