Will Food Prices Come Down?

Food producers are doing relatively well thanks to recent declines in commodity and fuel prices. Many grocers, however, are struggling as suppliers hesitate to pass their lower costs on to them and to consumers.

The Wall Street Journal reported Thursday that retailers are putting "pressure" on their suppliers to lower prices. What kind of pressure, beyond pleading, the Journal doesn't say.

The one grocer whose pressure really matters in terms of dictating terms to suppliers is the world's largest: Wal-Mart. The Journal notes that, during a meeting with stock analysts this week, Eduardo Castro-Wright, head of Wal-Mart Stores division, said the chain "will aggressively look for opportunities to share cost savings with customers."

Translation: Suppliers had better lower their prices or else.

That doesn't necessarily mean that all grocers will enjoy quick price decreases, but it could be that prices will come down a little more quickly than they have in the past. Historically, food producers have been quick to raise prices when their costs rise, but much slower to lower them when costs come down.

Kraft on Wednesday reported better-than-expected results, partly thanks to costs falling after higher prices had made their way to consumers.

Kraft CEO Irene Rosenfeld declined to say anything to the Journal about relations with suppliers, but she did say, "we're assuming our margin growth will come from volume growth and higher-margin products in the portfolio and not pricing."