Retailers playing hardball on prices

Food manufacturers continue to face the music when it comes to their prices.

The headline on this post comes from another good article on this subject. (See this article and this one.)

Seems food manufacturers can't catch a break from grocery stores and other retailers who can do the math for themselves and know prices aren't what they should be.

Here's a portion:

"We don’t have to carry three brands," Costco Wholesale Corp.'s Chief Financial Officer Richard Galanti told investors earlier this month. "We can choose between brands that are going to be more aggressive, that help us help our members."

Costco has been lowering its prices, Galanti said, and is prepared to sacrifice profit margins and cut national brands that won’t negotiate on pricing - if that’s what it takes to drive sales.

"We are not the only ones out there pressuring manufacturers," he said.

Steven Burd, president of grocery chain Safeway Inc., recently told investors that it has gotten some vendors to roll back their prices. Like many retailers, it is finding its new strength in its in-house brands, including Safeway Select, O organics and Primo Taglio deli products.

Of course, food manufacturers may bark back that they have lowered some prices, but the grocery chains are pocketing the difference. That, indeed, may be the case.

Food companies, however, set the table when they started blaming corn and biofuels for their price increases. Now that such costs have fallen by half, they may need to pull up a chair and dig into a bit of humble pie.