Grocers see drop in fuel surcharges

Decreasing costs of shipping to Juneau may not translate to lower food prices

Posted: Tuesday, December 30, 2008

As diesel drops, barging goods to Juneau gets cheaper. That could translate into relief on grocery bills - or relief for the grocers who ate those costs all year.

Brian Wallace / Juneau Empire File
Brian Wallace / Juneau Empire File

"People are able to get more out of their freight dollar than they did in July," said Eric Badger, Alaska Marine Lines Juneau port manager.

Barge companies Northland Services and Alaska Marine Lines dropped fuel surcharges again in December, this time to 11 percent. That's a 63 percent decrease from this summer's high of 30 percent. West Coast on-highway diesel fuel prices, meanwhile, have dropped 53 percent since mid-July.

Badger said he hadn't seen any change in freight demand that he could correlate to ups and downs in fuel surcharges.

Retailers that must ship large volumes continuously are at the mercy of freight prices. And the biggest continuous volume into Juneau is groceries, Badger said.

Whether customers will see lower prices depends on whether the grocers raised prices in the first place.

At two grocery stores downtown - Rainbow Foods, a natural-foods store, and the Alaskan and Proud supermarket - grocers ate the fuel surcharges rather than pass them on. They were already dealing with higher prices at the wholesale level, which they automatically build into the retail price.

Rainbow owner David Ottoson said he adjusted prices for a few heavy items that cost more to ship, such as juice in glass bottles, but absorbed most of the fuel surcharge.

Ben Williams, CEO of Ketchikan-based Williams Inc., which runs A&P markets in Juneau, Thorne Bay and Ketchikan, said his supermarkets didn't build the surcharge into prices. They're under pressure to compete with companies that can average freight costs, such as Wal-Mart.

"We ate it. I think most of the other merchants in Southeast did the same," Williams said. "My bottom line's not going to (be) worth a damn this year."

At Fred Meyer, prices were raised and will fall once again - a little.

"We have begun to see a little release on fuel surcharges," said Melinda Merrill, spokeswoman for the Portland-based Northwest supermarket chain. "If we haven't already started passing those savings onto customers, we will start doing so soon."

When costs went up, she said, "we ate as much of that as we could, because we knew people don't have extra money to spend."

Fuel is just one element of the retail cost of food, added Merrill and other grocers. When the price of corn goes up because of drought or demand for ethanol, so does that of corn-fed pork and beef.

"Changes in commodity prices have had a lot more impact on our prices than the fuel surcharges. We're starting to see a few things come down, but it takes a while," Ottoson said.

Ottoson said he noticed a few commodities were cheaper by the end of this year, including chocolate and breakfast cereal.

"We almost never see prices come down," he said.

Customers may have adjusted their buying habits to the higher prices.

Williams said many customers are "trading down" to house brands and less expensive national brands. Ottoson said some higher-priced items aren't selling as well, but bulk goods have become more popular.

• Contact reporter Kate Golden at 523-2276 or kate.golden@juneauempire.com.



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