Should Grocers Be Pricing Eggs at a Loss?

LaBonne’s, a four-store grocer in Connecticut, has been keeping its prices for Eggland’s Best large eggs at $3.99 a dozen, well below some competitors, as part of a commitment to keeping core food items affordable.

Bob LaBonne Jr., president and CEO, believes positioning his chain as the low-price leader in staples such as eggs engenders customer loyalty. The move also counters the notion that prices at independent grocers are more expensive than big boxes.

He told Grocery Dive, “As a smaller store, you have the image of being high-priced. So the last thing you want to do is confirm that by being overly aggressive on trying to get margins on items.”

By all accounts, LaBonne’s is the low-price leader in its markets. At other grocers near its flagship in Watertown, prices for similar large white eggs were $7.59 a dozen at Price Chopper and $6.99 a dozen at both Stop & Shop and Hannaford, according to online prices as of Wednesday morning.

Closer but still above LaBonne’s prices, a dozen large eggs in Watertown costs $4.49 at Adam’s Hometown Market and $4.59 at both ALDI and Target. Roche Bros.’ cheapest option was a dozen cage-free large white eggs for $4.49, as it doesn’t offer conventional caged eggs.

Egg prices in the U.S. remain at record highs as the bird flu epidemic spreads across the country for the third consecutive year. The outbreak, coupled with facility fires, resulted in the loss of approximately 40 million egg-laying hens nationwide last year, with 43% of those losses occurring in November and December, according to the U.S. Department of Agriculture.

Other factors driving up prices include seasonal demand, fueled by holiday baking and colder weather, that has lowered stock levels, as well as the impact of inflation costs for inputs like feed and labor.

A dozen large grade A eggs cost an average of $4.15 in the U.S. in December — a nearly 37% increase from the year before — according to data from the U.S. Bureau of Labor Statistics. Wholesale prices have risen even higher, with Midwest large eggs costing $7.27 per dozen, as reported by the global commodities tracker Expana.

Grocers often use eggs, along with other essentials such as milk and bread, as “loss leaders,” selling the products at a loss or for less than market value to drive steady traffic.

With the USDA recently predicting that egg prices will shoot up another 20% this year as the nation’s egg-laying population attempts to recover, grocers are deciding how much margin blow to accept as well as whether to place limits on egg purchases, with empty shelves spotted in grocers.

Karen Meleta, a spokeswoman for Wakefern, the parent of ShopRite and other regional grocers, told the New York Times that while the company has tried to maintain prices on eggs, it’s a “difficult thing to balance, particularly given the volatility of the market and the uncertainty resulting from these continued outbreaks.”

Mike Vickers, a manager at Sentyrz Liquor & Supermarket in Minneapolis, told the Associated Press, “It’s the first time in my life that I’ve ever had to be kind of embarrassed on what I’m selling eggs for. And it’s not our fault. We’re paying today $7.45 for a dozen eggs. We’re selling for $7.59. We’re making $0.14. That’s doesn’t pay the bills.”

Ricky Volpe, a professor of agribusiness at Cal Poly State University, told CBS MoneyWatch that using eggs as a loss leader can be beneficial. He said, “You can go on social media and you’ll see someone complaining about an $8 dozen of eggs and then someone else will chime in and go ‘I just got it for $4.’ Well, I absolutely guarantee you that was sold at a loss, and it was sort of a competitive effort to increase foot traffic. Maybe eggs are sold at a loss, but now you’re going to buy your milk and your bread and vegetables, everything else, and those will have the normal profit margins.”