Grocery Bills Going Up -- Again: General Mills, Kraft, Sara Lee among companies hoping brand loyalty will keep customers

It started in the cereal aisle, and it's spreading.

Food manufacturers, under pressure for months from higher costs for everything from product ingredients to the packaging, are confessing to new plans for price increases. Most already have gone through at least one round of price hikes this year.

The biggest companies in the cereal business, General Mills Inc. and Kellogg Co., said in late June they were raising prices by a few cents per ounce. General Mills, citing a 17 percent drop in profit during its most recent quarter, said it needed to make up for cost increases that it expects will total 9 percent for a fiscal year that runs through May 2009.

Now other companies are raising prices for their cookies, coffee, meats, cheese and baked goods, betting that shopping habits and brand loyalty will improve results for the balance of 2008.

Northfield-based Kraft Foods Inc., which in the spring implemented an 8 percent price hike on many products, expects to tap the consumer again. A company spokeswoman said Monday that Kraft is faced with "unprecedented" pressure in commodity costs.

"We expect costs to be up about $1.7 billion or about 12 percent for the full year," said spokeswoman Lisa Gibbons. She said Kraft is reducing expenses while investing in product quality and marketing.

Kraft's brands include Oscar Mayer meats, Philadelphia cream cheese, Oreo cookies and Wheat Thins. Some experts say recent price hikes have yet to drive many shoppers to try the generic products.

Weak dollar is part of it

The Financial Times said Sara Lee Corp. will raise prices by 20 percent later this year for its meat products. The Downers Grove company produces Jimmy Dean sausages and Ball Park Franks, among other products.

The paper attributed the pricing information to Sara Lee Chief Operating Officer C.J. Fraleigh. A company spokesman could not be reached for comment.

One positive sign for shoppers is that crop prices are falling in the futures markets. The price of corn, for example, has declined from record levels for 10 or the last 13 sessions at the Chicago Board of Trade.

Traders said better growing weather since the June floods in the Midwest will increase yields.

But a weak dollar and high global demand for American crops are expected to keep prices high.

"Experts agree we are seeing a fundamental shift in today's commodities markets, rather than a short-term cyclical bump," said Kraft's Gibbons.

Overall grocery prices are expected to rise 5 percent to 6 percent this year. But some categories are projected to post higher increases, such as eggs, fats and oils and cereals.

A report by the Food Institute, a research group for manufacturers, predicted 2008 increases of at least 9 percent for those products.