Feb 18th 2011 at 9:00AM

Biggest Grocery Store Markups: The Worst Deals in the Aisles

With food prices expected to increase by 3% to 5% this year, grocery stores are going to be forced to pass some of the extra cost on to shoppers.

But what accounts for some of the highest markups in the grocery store aisles now? Perishables. Foods that easily spoil and must be thrown away before they go bad cut deeply into a grocery store's 2.5% profit margin, prompting stores to raise prices, says Timothy Richards, a professor of agribusiness at the W.P. Carey School of Business at Arizona State University. "They've got to have high margins [for these foods] just because of the loss that supermarkets have."

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Besides perishables, what are the most overpriced products you'll find in a grocery store? To get the dish, WalletPop spoke with retail experts to find out which grocery store items we're overpaying for the most and how we can save on them.

Produce

Markup: Up to 75%

About 20% of all produce offered in grocery stores is thrown away before it's even sold due to spoilage, resulting in a 50% to 75% markup, Richards says. Niche products, such as berries, which don't have a long shelf life and come from smaller sellers, may have even higher prices.

The fact is, few shoppers want to buy blemished produce, which is why stores dump food that looks less than fresh -- they're trying their best to keep that high-profile area looking good. As Richards says, "If the produce area looks like crap, it's a bad reflection on the entire store."

Bottled Water

Markup: Up to 4,000%

Last year, this was second on our list of the 10 most overpriced products to avoid, with a 4,000% markup. As Jennifer Taggart, who blogs about reducing toxic chemical exposure, points out, most municipalities have good tap water that cost pennies. And other than buying in bulk at a big-box store or buying generic, there aren't many ways to save on bottled water, except for maybe just bottling your own from the tap.

Meat

Markup: Up to 60%

Because meat has a refrigerated shelf life of just five days and must then be thrown out, most meat departments in grocery stores aim for a minimum 30% markup, and often much higher, to make up for losses, says John Smith, a butcher at a grocery store in Jackson Hole, Wyoming. Steaks, for instance, are marked up 40% to 50%; some cheaper cuts, such as round and chuck meat, are marked up as much as 60%, Smith says.

Lesser cuts of meat -- those typically used for Swiss or cube steaks or cut into pieces for stir frys or stews that are marked up as much as 300% -- should never be bought at full price because they're always discounted at some point, said Smith, who's been a butcher since 1974 and is the author of the book Confessions of a Butcher.

"You should never buy anything that's been cut into small pieces," Smith says. "You should always buy the big piece." Some bigger cut of meat will always be on sale, and shoppers can ask the butcher to cut it into small pieces for free, he says.

Cereal

Markup: Average of 44%

One of the most basic cereals, Kellogg's Corn Flakes, had the highest average retail markup of 43.5%, according to a 2007 story from the American Journal of Agricultural Economics. At the low end was Ralston Cookie Crisp cereal, with an average 18.2% markup.

Prepared Foods

Markup: 40%

Prepared foods are so expensive because of the labor and kitchen space it takes to prepare them, according to Amanda Yates, who works for Foodonthetable.com, a website that integrates family food preferences with the sale items at local grocery stores. Instead of buying pre-made salads or seasoned salmon steaks, make them at home for one-third the cost, Yates suggests. WalletPop also found that most pre-cut fruits and vegetables have a 40% markup at grocery stores.

Canned Goods

Markup: 26%

Non-perishables such as soup are more than twice as expensive without a sale, according to information from AnyLeaf. The site found a Chunky brand soup at Safeway originally priced at $2.70 later on sale for just $1.25. A 26% markup is set low enough to entice shoppers.

AA Batteries

Markup: 70%

Because batteries are one of those items that are often bought at the last minute, stores keep the prices high to take advantage of your desperation. Andrea Woroch, a consumer savings expert affiliated with The Frugals, a family of money-saving websites such as FreeShipping.org, found that buying batteries in bulk at Costco can drop the price to 36 cents per battery. The Giant grocery store sold the same batteries for $1.12 per battery -- a difference of nearly 70%.

Pre-Ground Coffee

Markup: Up to 30%

This is another item that Woroch found to be up to 30% more per pound than the large coffee cans at big box stores. Coupons can drive the price down even more.

Antipasto Bar

Markup: Up to 100%

The olives, pickles, roasted red peppers and other such treats in center aisles certainly look appetizing, but they cost more per ounce than if you bought them in jars -- and they can be marked up by as much as 100%.

Foodonthetable.com's Yates found dolmas for $5 a pound in a grocery store, compared with $8.99 to $9.99 a pound at the antipasto bar.

Gourmet Cheese

Markup: 50%

You'll spend 50% more by buying this in the deli section of the grocery store as opposed to the dairy section. Stephanie Nelson of CouponMom.com recommends bypassing the deli and heading straight to the dairy section, where you'll often find the same varieties of cheese. Blue cheese that's $16 a pound in the deli section is often $6 in the dairy section, Nelson says.

Bakery

Markup: 100%

This is another prime area where you're paying for convenience. A 100% markup at a store bakery is common, Richards says. A $20 supermarket cake can be made from scratch or out of a box at home for just $5, Yates says. Bread can also be baked inexpensively at home.

Name-Brand Spices

Markup: 97%

Looking to save on purchases for your spice rack? Try shopping at a natural food store. Nelson says buying spices at a natural food store can save you up to 97% on the basic spices people buy regularly. For instance, a $3.52 jar of bay leaves at the grocery store will cost you only 12 cents for the same amount at a natural foods store, she says. Drugstores and discount stores also sell spices cheaper than at a grocery store. Another tip: Buy your spices from the "ethnic" aisles or better yet, in the ethnic markets.

Magazines

Markup: 90%

Paying the cover price of an individually-priced magazine is a ripoff no matter where you buy it. But at the supermarket, it's another impulse buy at the checkout counter -- and priced accordingly -- to tempt you into spending more money. Discounted subscriptions, Nelson says, can save you as much as 90%.

Want other ways to save at the grocery store? A little creative thinking can help you find a way to get the products you need for less: look for items on sale, stay away from prepared foods and start cooking more from scratch at home, and always clip coupons.

"Almost everything in the [grocery] store is priced at 'twice' what you would pay for that item if you just bought it when it went on sale," says Jeff Hunter, co-founder of AnyLeaf, in an email exchange with WalletPop.

Stocking up on non-perishable items when they're on sale is the easiest way to save, Hunter suggests, especially if you plan ahead. Seasonal items often go on sale as the holiday approaches, such as stuffing that gets discounted the closer it gets to Thanksgiving. Planning ahead and buying as the price dips can help smart shoppers avoid impulse buys or buying things when they need them right away, Hunter says.

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