Supermarkets Slash Prices

Deflation stalks the aisles; Safeway cuts below profit point
By Jason Farago,  Newser Staff
Posted Sep 17, 2009 7:32 AM CDT
Loblaws   (©Danielle Scott)
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(Newser) – Americans are getting a big break on the price of food, as the recession drives down the cost of wheat, milk, and other staples, and supermarkets fight feverishly for sales. After a year of dramatic increases, commodities are way down—the price of corn, for instance, is down 56% since July 2008. That may be good news to consumers, but deflation is very bad news for retailers, who are seeing revenues drop precipitously, reports the Washington Post.

"The deflation is deeper and more sustained than we had earlier predicted," said the CEO of Safeway, which is cutting prices beyond the point of profit in order to lure back customers. Supermarkets that only a few years ago were installing faux farmer's markets and selling $500 wine are now plastering aisles with sale signs, and customers are jumping at deals for mundane items like toilet paper and laundry detergent. Those new cost-conscious behaviors, consultants say, may endure long after the economy rebounds.