Wednesday, May 7, 2008

Food, fuel prices keep soaring

Businesses struggle to keep up with rising costs

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Charles E. Shoemaker⁄The Gazette
Claudia Zelaya (left) buys a muffin at Spring Mill Bread Company in Bethesda Tuesday from employee Christina Staib. The company, along with others throughout the county, are trying to combat rising food and ingredient costs, and in some cases raising prices to do so.
With fuel and food prices soaring, some businesses are being forced to make decisions about whether to raise their prices and risk losing customers, or to take a loss.

Some businesses are passing the expenses on to customers, while others are hoping they can afford to maintain their prices. Still other companies, particularly those selling organic products, say that consumer demand has kept up with rising prices, reducing the impact of climbing costs.

The Spring Mill Bread Company in Bethesda gets its wheat from two companies in Montana, requiring lots of gasoline and manpower as the grain travels more than 2,000 miles to Maryland. As gas prices continue to spike, the company and its customers are feeling the effects.

‘‘All across the board our supply costs have gone up,” said Hatib Joof, store manager, who had to raise bread prices at the store last month. ‘‘...People will complain, but at the end they say they understand.”

At Spring Mill, Joof said wheat prices have gone up 100 percent since last year, and honey prices have risen 5 percent. After taking losses for the last three or four months, the company decided to raise its prices. The store’s bread items have climbed 10 to 12 percent, Joof said, up from around $4.50 for some loaves to the current price of $4.95.

While Joof said customers have been understanding, he has noticed a shift in the type of products customers will buy.

‘‘There are certain breads, luxury items, like pesto asiago, that people are buying less of,” he said. ‘‘People are only buying it now as a gift, or only for the weekend.”

According to the Bureau of Labor Statistics, the cost of rice has climbed 34 percent since March 2007, and dairy products rose 14 percent over the same time period. Cooking oils have gone up 46 percent, while pasta products have gone up more than 30 percent.

Despite the rising costs, however, area small businesses say the customers are still coming.

At the Takoma Park Silver Spring Co-op in Takoma Park, finance manager Prisca Egocheaga said food costs have risen about 2 percent from its distributor. Instead of passing the costs on to customers, however, Egocheaga said the store decided not to raise prices.

‘‘Luckily it hasn’t had much of an impact on us yet,” she said. ‘‘Maybe in the future it will, but for now it hasn’t.”

Bethesda Co-Op Natural Food Market in Cabin John has raised its prices to adjust to rising overhead. Peter Dixon, the store’s manager, said he doesn’t foresee it affecting business.

‘‘Luckily, in our area people can still afford it,” he said. ‘‘They’ll come in and make comments, but for the most part people are understanding.”

Passing costs on to consumers, however, may be more difficult than it sounds for small businesses. Unlike large corporations, small businesses have fewer opportunities, and locations, to hide rising overhead costs, according to Ellen Valentino, Maryland director of the National Federation of Independent Business.

‘‘Small businesses have to absorb these increases, because they just have so much more competition than the larger businesses,” she said. ‘‘If prices go up, a customer may not come back to a small bakery or shop.”

She said she hopes the economic stimulus plan checks will entice consumers to spend a bit more, and visit some of the small businesses they may have been avoiding in previous months.

Some area business owners are seeing the opposite side of the coin. Potomac resident Nick Maravell owns Nick’s Organic Farm in Frederick County. Over the past year, Maravell said demand from customers, along with sale prices, have climbed, due to what he sees as a desire among consumers to know where their food is coming from.

On his farm he has raised his feed corn prices from $10 to $14 in the past year, and livestock prices have climbed 5 to 10 percent.

‘‘With conventional food stores raising their prices, I think people are starting to come to farms more often,” said Maravell, who sells Black Angus beef, poultry, soybeans and other items. ‘‘Knowing where your food is coming from is becoming pretty popular.”

At Spring Mill, Joof said the company has cut its grain purchases in half, in hopes that prices will soon come down.

‘‘We’re still optimistic that this will turn around and not be permanent,” he said.