The high price of grocery shopping local

As consumers, we face a daunting gauntlet of concerns with how and where we spend our money.  Should we spend only in our financial interest, and shop diligently for the lowest price?  Should we concern ourselves with shopping locally?  When purchasing food, should we care about ingredients or farming practices?  This spring, I set about the task of trying to answer some of these question for my own household purchasing, and I found a surprising answer:  the cost of shopping locally significantly exceeded the cost of purchasing my typical products at not only a warehouse store (which one would expect) but also at a national, high-end retailer. 

I should make one parameter clear before we discuss some of the details: all of the items on my list were organic (food stuffs), grass fed beef, or products made with high recycled content/all-natural ingredients.  Our family already made the commitment to know as much as we can about what goes into our food, and ensure – to the greatest extent possible – that we had a level of comfort with the growing practices that went into what we eat.  Also, we have committed to reducing or eliminating waste, and purchasing household cleaning and personal care items with a minimum of unnatural chemical ingredients.  This analysis does not seek to compare that level of shopping with what one might call “conventional” shopping.  We already accept that where there is a premium we will pay it because the product improves our quality of life.  That decision is a personal one that no one can make for another, and I have no desire to discuss that topic here.  What I hoped to find, was given that decision, what choice of retailer type makes sense.  (Names have been withheld to focus on the results and not the individual companies.) 

Our options include:

• A national warehouse chain that sells items in bulk, with relatively few locations.  This choice requires us to drive eight miles one-way, but through local traffic on arterial streets.  Our total round-trip can take anywhere from forty-five minutes to over an hour.  
• A national, premium food chain selling organic, local, and fair trade products.  This also requires driving, but the travel uses expressways and although a longer distance, takes only about thirty to forty-five minutes for a round trip.  
• Our locally owned and operated supermarket that has a comparable stock to the recognizable national “conventional” supermarkets, but has added a significant amount of organic food products.  The store sits two miles from our house, and the round-trip through the neighborhood takes about ten minutes.

In order to make an accurate comparison, my wife and I visited all three stores on the same weekend in March, and found – where possible – the same brand of product.  Where a particular brand was unavailable, we used a brand of comparable quality.  In some cases, organic food or items with environmental attributes were not available, so we made the best selection possible.  This affected only a small number of products, and did not significantly influence the results.  We chose the following items for the analysis:

½ gallon of lowfat milk

½ gallon of soy/almond milk

1 dozen organic, cage-free eggs

½ gallon of premium, non-organic orange juice

½ gallon of organic juice smoothie drink

6 servings of Greek yogurt

2 bags of kettle-cooked chips

2 pound of mixed, frozen veggies

12 individual-serving coffee cups

2 bags of natural popcorn

1 box of organic cinnamon cereal

24 ounces of 100% maple syrup

2 pounds of organic whole-wheat flour

1 pound of organic cane sugar

6 boxes of natural macaroni and cheese

14 ounces of vegetable broth

16 ounces of tomato & basil sauce

1 pound of organic long-grain brown rice

1 pound of organic quinoa

1 can of organic diced tomatoes

12 ounces of organic mixed greens

3 pounds of organic apples

1 pound of organic broccoli

½ pound of grass-fed beef

6 ounces of natural moisturizing lotion

8 ounces of premium sunscreen

30 count of 100% recycled paper towel

2 packs of 100% recycled paper bathroom tissue

30 ounces of high efficiency, non-phosphorous-containing laundry detergent

12 ounces of non-phosphorous-containing dishwater powder

Admittedly, this is not a complete list of every item needed every time, and some of the items are irregular purchases (such as detergent), but the analysis takes into account the variability and tries to spread the purchases out over what would be an average week.  If you have an interest in the detailed cost-per-unit for each item, you will find it here.

On purely a financial basis, the average weekly cost for all of these items at the warehouse store costs just under $145, with a comparable cost of $168 and $188 at the national premium store and the local store, respectively.  This result makes sense in our typical understanding of the economies of warehouse stores versus other outlets, but the difference between the national store (notorious for having higher prices) and the local store surprised me. 

To determine how incorporating the environmental impact influenced the value proposition, I looked at the cost of gas to travel to the three stores, then using Department of Energy data, computed the carbon impact for the gasoline, and finally applied a social cost of carbon to the pollution generated to determine if the distance travelled shifted the net cost in any way.  Using a 40 mpg car as the mode of travel, I arrived at the following:

Even with a cost of gasoline at the peak of this season ($4.50) and a social cost of carbon at the high limit of analysis ($266/ton), the costs change by less than one percent, with the national retailer bearing the greatest increase, eliminating about eight percent of the difference between it and the local store.  Even with this taken into account, our family would spend about $800 more a year shopping at our local retailer for these items than going to the national, high-end supermarket.

Taking a look at one last factor, the effect on the local economy, the supermarket industry does not have a similar business model to most local small business, so the impact of a dollar spent does not have the same impact locally.  According to the Food Marketing Institute, the typical supermarket spends over seventy percent of its revenue on purchasing goods.  Since our neighborhood produces none of those goods, that capital leaves our community no matter where we shop.  Of the remaining, nearly thirty percent, between one and two percent is profit, about eleven percent covers employee salaries, and the remainder goes to various operating and maintenance expenses.  In the best-case scenario, somewhere between ten and fifteen percent of the revenue (including the salaries and some maintenance and operating expenses that might go to a local contractor or service) would remain in the community.  That means, of the approximately $9,800 we would spend at the local store each year, about $1,100 might remain in the community.  Looking at the savings at the warehouse store, we could donate $1,100 to an organization that puts capital into the local economy, and still keep around $1,000 per year in our pocket.  Even compared to the national store, we could donate $1,100 per year, and pay about a $250 premium while getting access to all the brands we like without having to sacrifice because the local store does not carry them.

Analyses such as this can vary based upon one’s point of view about what which items to choose, and the balance of factors used.  The warehouse store does not have grass-fed meat in any reasonably priced quantity, so someone whose house consumes significant amounts of beef would find their total bill better at the national market.  Also, the warehouse does not have the variety of produce that the national store carries.  What remains consistent in most permutations is that the local store always has less buying power for the consumer.  This loss of buying power does have a benefit, however.  Over the course of a year, we would spend over forty fewer hours driving to and from the store if we shop locally versus going to the warehouse store, and about twenty-five fewer hours than going to the national retailer.  Whether that balances out the money saved is a personal choice, and one we will ultimately consider when we decide how we want to behave going forward. 

In the end, the environmental impact of shopping outside the neighborhood does not significantly affect the economics – even with a liberal pricing of the environmental impact.  The value saved shopping outside the neighborhood also provides so much value that the consumer could use some of the savings to directly make up the local economic impact.  Lastly, the variety of options available – for the conscientious consumer – lags at the local store compared with the other options.  Shopping local as a general practice has its benefits, but when it comes to groceries, the current marketplace for our area does not favor the local store.