Friday, June 06, 2008

More Cowing of Food Retailers

As we've already pointed out, the city council report on milk pricing released yesterday misstates the reality of the retail food environment, and gives the false impression that retailers are gouging. This is clearly indicated in some of the other press reports that emerged this morning.

The NY Post story's a case in point, with an unfair and misleading headline leading the way:


The story itself is not much better: "New Yorkers are being milked for their hard-earned grocery dollars. A whopping 86 percent of supermarkets, delis and bodegas throughout the five boroughs are charging above the state-mandated price ceiling for milk, according to a City Council survey released yesterday."

And it goes on, without any real clarification of how the law itself works, to confront hapless consumers: "Shoppers cutting every corner to make ends meet - many of whom did not know there were legal price limits - were appalled to learn they were getting gouged.
"I have two children. We buy a lot of milk. If it's overpriced, it's unfair for mothers and their children," said Gloria Williams, 36, who was shopping in Murray Hill."

But is it really? As the Post points out in the small print of the story: "The complex state law does allow stores to make a case for above-the-limit prices before they are considered in violation. Most of the major supermarket chains have done so, but many smaller shops do not."

Not doing so, however, doesn't mean that the store's gouging-since arguing the case means that a store will be able to show how its costs mandate a higher retail price, and not arguing the case only means that a small retailer is not aware of the need to do so (not that the costs don't justify the higher price). All of which is left unexplained in the Post story.

In a similar AMNY piece we are at least given the other side: "The prices are adjusted monthly by the state department of agriculture, and are shaped by different factors such as global demand. The price is set to ensure that stores can make a profit, but stores that deem the prices too low can apply for exemptions." This is not a hard and fast price ceiling by any means.

And what do some of the retailers say? "Industry insiders bristled at the notion that stores were scamming their customers."Milk is a commodity no one tries to make money on," said Nelson A. Eusebio, the executive director of the National Supermarket Association. "It's the kind of item that drives people to the store, and you always want to be cheaper than the next guy."

John Catsimatidis, the owner of Gristedes Supermarkets, called out the council for its ignorance of supermarket economics, and for the failure to address the disappearance of the local food store: "John Catsimatidis, the chief executive of Gristedes (and a client of ours), said the council didn't understand the economics of running a grocery store in New York City."The supermarket business is a dying breed in the New York area," he said. "Fifty percent of the supermarkets in New York City have gone out of business in the last 6 or 7 years because they didn't charge enough."

So what is really happening? Costs in the city are escalating-and the government's role is not insubstantial. In 2002, the city raised the commercial real estate tax, raising store rents by 20%. In 2003, the city raised carting costs, lifting a rate cap and imposing added fees that have run into the tens of millions of dollars. At the same time, the city council refused to pass Intro 133, a bill that would have allowed food stores to use commercial food waste disposers-and thereby cut disposal rates by 80%.

This year, the city continues to advocate for expansion of the state's bottle law, one that has added considerable cost to space-cramped NYC food retailers; and has added to this burden, a plastics recycling law that retailers will have to pay for. And of course, there's also the cockamamie vegetable peddler bill that will inevitably place fruit and veggie carts right in front of neighborhood supermarkets; taking thousands of dollars away from the tax paying store owners.

When we add to all of this the millions of dollars of fines for a myriad of silly violations, and the rising cost of real estate itself, is it any wonder that food prices are rising and stores are closing?
So let's put our attention where it truly belongs-and place the responsibility at the foot of government and not at the feat of hard working food retailers. In doing just that, the city council report does both store owners as well as consumers a great disservice.