Why Californians Are Spending More on Groceries Than the Rest of Americans

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HelpAdvisor, a company focused on finance and health, recently conducted a study based on U.S. Census Household Pulse Survey data. It determined that Californians spend more money on groceries every week than residents of any other state.

The average U.S. household spends $1,080 a month on groceries — or $270.21 per week. In California, however, the average household spends $297.72 a week. People in cities like San Francisco and Riverside spend even more, at $298.44 and $300.50 per week, respectively.

Why are people in California spending more on groceries? Here are some possible reasons.

High Cost of Living

The overall cost of living in California is much higher than it is in nearly every other state. In fact, only Hawaii, Massachusetts and Washington, D.C., rank as being more expensive to live in.

According to the Missouri Economic Research and Information Center, the overall cost of living index in the Golden State is 138.5. Everything, including the cost of groceries, housing, utilities, transportation and healthcare, is more expensive in the state than in most others.

“The overarching driver of elevated grocery costs in the Golden State boils down to California’s uniquely high cost of living,” said Alec Kellzi, a California-based licensed CPA at IRS Extension Online. “With so many people packed into urban cores, real estate is at an absolute premium for these chains to operate stores conveniently located near dense populations.”

This essentially leads to grocery stores upping their prices to accommodate for higher overhead costs.

Regulations and Wages

It’s not just the overall cost of living that affects grocery prices. Other factors, like regional wages and regulations, can have a major impact too.

“Then you have operational factors impacting grocers themselves, like paying employees higher minimum wages, navigating stringent environmental regulations and dealing with recurring droughts that strain agricultural supply chains,” Kellzi said. “Those overhead costs inevitably trickle down to retail pricing on store shelves.”

Right now, California’s minimum wage is $16. Certain types of employees, such as those in the fast-food industry, have a higher minimum wage. Cities can also have different minimum wages, like San Francisco, which has a minimum wage of $18.07.

Other regulations also have a role in grocery prices.

For example, the California Organic Products Act of 2003 makes it harder to sell organic food items, so grocery stores that offer organic products may have to increase their prices to offset their own expenses.

The California Environmental Quality Act may also indirectly contribute to some of these higher costs. This act requires public agencies to think about the environmental impacts their various projects and activities might have. This, in turn, could delay production and lead to higher prices — even at traditionally cheaper grocery stores.

Specialty Stores

California is home to many major and specialty stores, which could also be driving up food costs.

“Major grocery banners consistently charge a premium for the California market versus other geographies they operate [in]. The usual suspects come to mind like Whole Foods, which kind of transcends conventional grocery with its organic, sustainable, high-end positioning,” Kellzi said.

“But even traditional supermarkets have to pass along higher operating costs. Kroger-owned chains like Ralphs and Food 4 Less are reliably pricier out here. The same goes for Safeway, Vons and Pavilions, [which] cater to the more affluent customer base,” Kellzi explained.

Inflation

Inflation has played a major role in the rising costs of everyday goods and services, including food. While inflation has more or less leveled out, it was particularly high in recent years and led to skyrocketing grocery prices across the country.

According to the U.S. Bureau of Labor Statistics, food prices had risen by 11.4% over the course of a year ending in August 2022. Over the past 12 months, food costs have gone up by 2.2% nationwide. During that same period, food prices increased by 2.9% in the Los Angeles area.

Many factors can affect inflation rates, including supply shocks (which occur when there’s a sudden change, like the inability to produce something) and money supply (which affects demand).

Also, people can expect the money supply to increase or costs to drop — even if it doesn’t actually happen. This can lead to more demand and higher costs. It can also result in individuals demanding higher wages to afford those higher costs. This can then result in businesses raising their prices to pay the higher wages and so on.

Some Food Costs in California

Certain types of food are more expensive in California than in other areas. This is especially the case in more expensive cities like San Francisco.

For example, a gallon of regular milk costs $6.06 in San Francisco. In comparison, it costs just $3.65 in Raleigh, North Carolina.

The costs of other everyday staples also tend to be higher in California. For instance, a pound of uncooked white rice costs $3.03 in San Francisco. A dozen eggs goes for $5.41, and a pound of beef round is $9.31. All of these costs are substantially higher in San Francisco than in cheaper parts of the country.

Combating the High Cost of Groceries

Whether or not you live in California, there are a few ways you can cut food costs.

“First, joining customer loyalty programs and closely following the weekly ads for money-saving sales can help stretch budgets,” Kellzi said. “Buy in bulk for non-perishables at warehouse clubs too. And ethnic supermarkets offer amazing deals on produce and cultural pantry staples.”

Another option is to do some price comparisons before you shop.

“It also pays to shop around selectively — maybe Costco for bulk dry goods, a discount chain for packaged items, then ethnic markets or farmers markets for fresh foods,” Kellzi said. “Speaking of farmers markets, these are a no-brainer for affordable, locally grown fruits and veggies without the retail markup.”

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