By Martinne Geller
CHICAGO (Reuters) - Consumers are seeing their grocery bills rise, but what they may not have noticed just yet -- and what they will be seeing even more of -- is that their hard-earned cash will be getting them less and less of their favorite products.
As author and comedian Steve Martin said during his stand-up days -- "Let's get small ... real small."
Most food companies have raised prices over the last year to offset unprecedented spikes in costs of key ingredients like milk, grains, cooking oil, coffee and cocoa, due in part to growing global demand and the push to turn corn into ethanol.
The food portion of the U.S. Consumer Price Index, the most broadly used gauge of inflation, rose 0.4 percent in February after a 0.7-percent jump in January. Labor Department officials had said the January rise was the largest since a matching gain in February last year.
But as consumers juggle these increases with lower home values, job uncertainty, gasoline exceeding $3 a gallon, and a looming recession, they are likely to begin trading down to cheaper private-label brands, according to Robert Goldin, executive vice president at Technomic, a food and restaurant research and consulting firm.
"I think consumers are going to be near a breaking point on a lot of these," Goldin said.
Aside from "real price increases," Goldin said he expects "stealth price increases," such as cutting the weight of food packages while keeping the price unchanged, or switching to lower-cost ingredients without telling consumers.
While food company executives gathered this week for the Reuters Food Summit in Chicago did not admit to "lowering the quality" of their products, many said that "weight-outs" were nothing new. Continued...
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