Despite low overall inflation, the price of basic foods is rising, presenting food companies with a dilemma: do they let rising costs erode profits, or raise prices while demand remains weak? Milk, beef, coffee, and sugar have all seen price spikes, driven by growing demand in China, India, and developing economies, the Wall Street Journal reports. The US consumer price index—minus food—rose only 0.8% over the year to September, while the food index rose 1.4%, and is expected to rise to 2%-3% next year.
"The big challenge will be, how much can we swallow and how much can we pass along?" says the owner of a grocery chain in California. Most big chains and retailers are signaling that higher prices are imminent, if they haven't raised them already. BJ's Restaurants, for example, is pushing through price increases, but also improving the decor. "You can't just raise prices without improving the overall dining experience," says the chief financial officer.