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Food Spending Turns Anorexic

Restaurants, name-brand food hit hard as diners opt for cheaper fare

By Clay Dillow, Newser Staff

Posted Feb 13, 2009 9:36 AM CST

(Newser) – Americans have trimmed their food spending sharply, hitting restaurants, food retailers, and brand-name food producers squarely in the gut, the Wall Street Journal reports. In the last quarter of 2008, spending on food plunged an inflation-adjusted 3.7% from the previous quarter, the steepest decline since the government began keeping tabs 62 years ago, as consumers opt for generic items and dig deep into their own pantries.

Kraft Foods trimmed its annual earnings forecast last week, and on Tuesday Citi Investment Research warned of a modern-day “price war” as Wal-Mart prepares to revamp its Great Value private-label foods and trim national brand prices, pushing competitors to do the same. Restaurants have it even worse, with chains like Starbucks and Ruby Tuesday shuttering hundreds of locations as same-store sales plunge.

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Consumer spending on food was down 3.7 in the fourth quarter of 2008 from the previous quarter. Restaurants are taking a particularly hard hit as consumers are dining at home more. (AP Photo/Jamie Martin)

Wal-Mart stands to gain as consumers retreat into cheaper foods as the economy weakens. (AP Photo/Ed Betz)

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"You can't contract at this rate for long. It's just shocking."
- Joseph Carson, economist at AllianceBernstein

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Food Spending Turns Anorexic