Food Companies Use Different Methods to Pass on Costs

CBS MoneyWatch reports most food manufacturers will increase prices, but you may not notice when looking at your grocery bill.

Food companies plan to increase prices and decrease serving sizes this year to cope with rising oil prices and commodity costs. Sara Lee will increase prices by 3 percent in the first half of 2011 and plans to add an additional 4 percent to 6 percent to the price tag in the second half of the year. ConAgra anticipates higher price jumps, adding 25-percent increases to its items including packaged meals like Healthy Choice and Marie Callender.

While consumers will notice price hikes on supermarket shelves, some companies are practicing a more subtle tactic. Kraft Foods is reducing packaging size to prevent sticker shock. Smaller package sizes are a trend gaining popularity in the food industry.

Food manufacturers are also seeking out cheaper ingredients to lower costs. Sara Lee has adjusted its coffee blend, using more of the less expensive Robusta bean and fewer of the more expensive Arabica beans.

Reprinted from DroversCattleNetwork.com