November 17, 2012

Cheap turkeys the lure for grocers' all-important fourth quarter

The tools and trimmings to roast a holiday bird are where supermarkets make their profits, say experts

By Jessica Hall
Staff Writer

The Thanksgiving table may be groaning with an excess of food on Thursday, but chances are the items on it will be a bargain.

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Supermarkets, such as Hannaford and Shaw's, sell turkeys for little to no profit every holiday season in hopes of luring shoppers, who will buy the roasting pans, vegetables, seasonings and other items that add up to the biggest sales period of the year, say retail consultants.

AP file photo

Supermarkets drop the price of whole turkeys during the holidays in hopes that shoppers will buy far more than the birds and accompanying purchases of trimmings, roasting pans and basters will boost their profit margins.

Grocers including Hannaford and Shaw's discount turkeys below their own wholesale prices to draw customers with long holiday shopping lists. The discounts are so deep, in fact, that Hannaford President Beth Newlands Campbell said the company makes more money recycling the boxes the turkeys are shipped in than on the turkeys themselves.

"The turkey at Thanksgiving -- that's the anchor for a couple of big shopping trips. The holidays could make or break a retailer's year," said Jim Hertel, managing partner of Willard Bishop, an Illinois-based food retail consultant. "They aren't winning or losing the year on turkeys. It's the roasting pan, general merchandise and utensils -- that's the stuff that makes the money."

Grocery stores make one-quarter of their annual sales in the last two months of the year, Hertel said. Supermarkets typically operate on profit margins of just 1.5 percent to 2 percent, so heavy volume is needed to keep the businesses humming.

Locally last week, prices for frozen turkeys ranged from 49 cents a pound at Hannaford to $1.89 a pound at Whole Foods. Trader Joe's was selling fresh turkeys for $1.99 per pound.

The average wholesale price for frozen whole turkey during the fourth quarter of 2012 is projected to range from $1.10 to $1.14 per pound, similar to last year's fourth-quarter average price of $1.11 per pound, according to the U.S. Department of Agriculture's Economic Research Service.

The average retail price for whole frozen turkeys dropped to $1.62 per pound in September, down about 6 cents from a year earlier.

The traditional Thanksgiving feast is expected to cost less this year, in part because many retailers locked in costs before a drought drove up grain and feed prices, analysts said. Other retailers may be swallowing the high cost of foods such as grains and grain-fed meat to sell other groceries and general merchandise with bigger margins.

For U.S. consumers, the average cost of feeding 10 people the 12 classic items typically served at Thanksgiving will be $49.48, up only slightly from $49.20 last year, according to a study by the American Farm Bureau Federation.

Although that's the highest cost since the annual survey began in 1986, the inflation-adjusted cost was down from last year, the farm bureau said.

"At just under $5 per person, the cost of this year's meal remains a bargain," said Bob Stallman, president of the farm bureau.

In the study, the centerpiece item -- the turkey -- had the biggest price increase, due to a slight increase in demand, according to the farm bureau's economist, John Anderson. Turkey consumption in the U.S. is expected to reach 16.4 pounds per person in 2012, a 2 percent increase from last year, the USDA said.

"Turkeys may still be featured in special sales and promotions close to Thanksgiving," Anderson said. "Anyone with the patience to wait until the last minute to buy a turkey for Thanksgiving could be rewarded with an exceptional bargain."

Betsy Morse of Wiscasset said she's waiting until Wednesday to buy all of her supplies. "I'm waiting until the last minute for the best deals," she said.

Other items that increased in price over last year included rolls and miscellaneous ingredients needed to prepare the meal, such as onions, eggs, flour, evaporated milk and butter.

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