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Sticker shock at the supermarket

U.S. families use ingenuity and belt-tightening to save on mounting grocery bills.

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Meanwhile, discount retailers are doing bang-up business. Wal-mart's stock price hit a four-year high last week on the heels of increased spending on, among other things, groceries. Costco's sales are up 9 percent from last year, and BJ's has reported a 13.4 percent sales increase in the last year, much of it attributable to food sales.

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Local grocery stores are trying to undercut the big-box retailers as best they can. Both Publix and Kroger in Atlanta were offering penny rolls of toilet tissue this week to try to bring shoppers in. The stripped-down, cut-rate German grocery store Aldi, with about 850 outlets in the US, is moving rapidly to suck up sticker-shocked consumers. A May circular featured bacon-wrapped filet mignon for $1.99 apiece.

At the same time, the restaurant industry is seeing customer numbers drop even as some restaurants are raising menu prices or reducing portion sizes to balance their own inventories and cost. Sixty-one percent of restaurant owners in a recent survey say their sales numbers are sliding even as the industry faced flour costs going up by 78 percent, the cost of eggs up by 73, and cooking oil up 49 percent, according to Annika Stensson of the National Restaurant Association.

At a conference in Phoenix last week, the Nielsen marketing company told consumer packaged goods companies that recessionary spending habits by Americans are forcing producers and retailers to adjust their strategies on the fly as grocery store competition heats up.

"Consumers are feeling the squeeze as they are caught between rising costs and lower spending power," Eugene Roytburg, managing director of Nielsen, told the conference. "As a result, many consumers are reprioritizing or altogether changing their spending habits."

Kroger clerk Grady Thompson says prices are "the worst I've ever seen them," as usually choosy, upscale customers empty out the "10 for $10 bins" of canned foods in midtown Atlanta.

In Camden, Ala., where the median income is $16,646, Nelda Hunter is in full scrimp-and-scrounge mode. "It's very simple, just changing a few habits," says Ms. Hunter, a clerk at Loftin's Bait Shop, in a phone interview. "You don't go to the grocery store hungry to start with. And it's basically doing a menu situation about getting a list and buying nothing but what is on the list."

Just in the last month, Atlanta mom Tammy Heath started inspecting the Sunday circulars and shops accordingly. "These days, I go where the sales are at," says Ms. Heath.