If you suspect that you're paying a lot more for cereal now than you used to, your instinct is right on target.
Since 1983, cereal prices have gone up more than 75 percent -- more than twice the average price increase for all foods eaten at home, according to the U.S. Department of Labor.
Many cereals now cost $3 to $4, and some larger boxes are shooting toward $5.
The good news for shoppers is that the value of cereal coupons has also climbed, with a handful approaching $2 -- as much as a whole box of cereal cost a few years ago.
"You're crazy to buy cereals without coupons," says John McMillin, a senior analyst at Prudential Securities in New York.
A consumer who scans the ingredient list on a typical cereal box may well wonder: Do a few scoops of grains and a handful of sugar, fruit and nuts really cost that much to make?
Of course not, price analysts say.
But raw materials are only one factor in pricing. Others include advertising, marketing, processing, freight, packaging -- and profit.
"It's a capitalistic society. You take the price increase if you can get away with it," says Mr. McMillin.
"Why can you get away with it? At an average of 20 cents a bowl, cereal is still a good value . . . and your alternatives are low. These products are very distinctive. . . . Private label is developing in this category, but they haven't duplicated all the products."
Still, he and some other analysts feel the cereal price increases may have been overstated -- particularly when coupon use is considered.
"It's wrong to look at cereal prices just on the list price basis," says Nomi Ghez, an analyst with Goldman Sachs and Co. in New York. ". . . There's a tremendous amount of coupons in the industry. This is lowering the price" that many consumers actually pay.
Using coupons
About 35 percent of ready-to-eat cereal is purchased with a coupon, according to Nielsen Household Services. By comparison, coupons are used for only 14 percent of grocery purchases overall.
With coupons factored in, says Mr. McMillin, "I'm not sure . . . that pricing has gone up in the last three years anywhere near as much as it went up the previous seven."
The cereal industry has had 13 major price increases since November 1984, with the latest being a 3.1 percent upswing in January, according to Prudential Securities data. Like many other industries, when one manufacturer raises prices, others tend to go along.
