Shirley Mitchell, 55, picked up a few groceries this week to bake Christmas cookies as gifts. But rather than go to a traditional supermarket, she picked up some of the ingredients at Dollar General, a discount store with more "consumables" on its shelves.
"It's horrible," Mitchell said of the economy as she placed a $1.85 package of a dozen eggs into her cart. "I think it's going to cause everyone to pull tight."
Economic uncertainty has persuaded more consumers like Mitchell to leave behind traditional grocery stores in search of bargains on items such as canned foods or other staples. Discount stores such as Dollar General and Wal-Mart are reaping the benefits.
The trend comes as average food prices in the Nashville area — and consumer prices nationally — decline compared with early November.
A market basket survey of basic food items done periodically by The Tennessean shows prices have dropped 1.65 percent in the past six weeks,a welcome sign for shoppers who had seen gasoline prices dip earlier this fall but food prices remain stubbornly high.
Traditional grocery stores, meanwhile, are doing more to present themselves as a good value amid tougher competition from discount chains.
Cost-cutting and offering more bargain merchandise are among reasons some stores have "become more interested and more aggressive with private brands," said Jim Hertel, managing partner for Willard Bishop, a Barrington, Ill.-based consulting firm.
Several H.G. Hill stores have expanded displays and offerings of the "Always Save" brand — the grocer's most economical store brand — to help consumers on a budget, said Scott Means, president of S&C Foods Inc. It operates several H.G. Hill grocery stores in the Nashville area.
Discount stores thriveGoodlettsville-based Dollar General Corp.'s revenues grew to $2.6 billion, up from $2.3 billion a year ago, during its third quarter ended Oct. 31.
Sales at stores open at least 13 months increased 10.6 percent.
Consumables, which include food items, make up at least two-thirds of Dollar General's recent sales volume, the company said. Consumables are health and beauty products, cleaning products, paper products and food.
Wal-Mart also has improved with food sales.
"People are so pressed for time, once they get there; it's easier to stay and make your purchases there than it is to go somewhere else," said Britt Beemer, chairman of Charleston, S.C.-based America's Research Group. "People just believe they are going to save money at Wal-Mart."
About 36 percent of consumers surveyed in September said they go to discount stores more often for food and beverages compared with a year earlier, according to New York-based research firm NPD Group.
Nationally, the consumer price index, the average change in prices over time of goods and services purchased by households, declined 1.7 percent in November on a seasonally adjusted basis, the second consecutive dip.
Analysts said lower transportation costs helped spur the decline, but some cautioned that the country might be headed for a temporary deflationary period. That's generally seen as a negative because it means there's less demand from consumers, and a prolonged period of low prices can hurt businesses, lead to more job layoffs and damage the economy.
"It's going to mean even fewer jobs and unemployment," said Bill Ingram, Lipscomb University professor of economics and finance. "It's not the direction we want to head."
Some discount grocers are expanding operations as shoppers pinch pennies.
Discount grocery store Aldi, where nearly all of its products are store brands, will open 100 new stores nationwide by the end of the year, bringing the total to about 1,000 stores by early 2009, spokeswoman Martha Swaney said.
Next year, Aldi plans to open at least 75 stores. "That is fueled directly by consumer demand," Swaney said.
Another factor that may affect food prices is consumers trading down in food choices and not switching back.
Vicky Griffin, a 47-year-old security officer, said her family stopped buying hamburger meat at the grocery store and started buying canned tuna fish and Spam at Dollar General. Higher gas prices and food costs during the summer were "awful" on her budget, Griffin said, so she started looking for ways to save money.
But even though average gas prices have dropped to $1.54 a gallon in Nashville as of Wednesday — almost half of the cost a year ago — she's still sticking to buying tuna and Spam to trim expenses.
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