Over the past 10 years, the growth of nontraditional retail food outlets has been of the biggest changes in the retail food market landscape. Nontraditional retailers have helped to increase the variety of shopping and food options available to consumers, and also have increased the amount of price variation in retail food markets. The current CPI for food does not fully take into account the lower price option that a nontraditional retailer offers when it enters and expands in a given geographic market. A significant difference exists between price change as measured using scanner data and the CPI estimate of price change, even for the relatively low food inflation period of 1998-2003 covered in this report. The results of this study estimate that the BLS CPI for dairy products overstates food price change by 1 to 3 percentage points per year for the dairy, eggs, and butter and margarine CPI categories.


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