Higher costs have impact on Valley business owners

Some Valley merchants say customers are griping over sky-high dairy prices.
By CYNTHIA VINARSKY
VINDICATOR BUSINESS WRITER
Like the proverbial cloud with a silver lining, record-high milk prices have been a boon for Giering's Homemade Ice Cream in New Middletown.
Owner Bob McAllister had only retail sales in mind when he opened the shop two years ago, but rising dairy prices since January pushed him to diversify, and fast.
He's created more business by landing wholesale contracts with the Mahoning Valley Scrappers and several area stores and restaurants. Selling more ice cream means he can buy his dairy-based ice cream mix in larger quantities to keep costs down.
McAllister's success notwithstanding, Valley business owners say customers are griping a lot about the record-high dairy prices, and some are changing their buying habits.
Several factors, ranging from high fuel costs to increased demand related to the low-carb/high-protein Atkins diet craze, have pushed milk and dairy prices to record levels.
Raising prices
Ianazone's Homemade Pizza has been forced to raise its prices $1 to $1.25 per pie to cover the higher price of cheese, said owner Jim Ianazone.
"About 80 percent of people understand. They know we don't skimp on our cheese, we use about 12 ounces of cheese on one pizza," he said.
"Of course, some do complain, and I notice some are ordering pizza less -- maybe once every 20 days instead of once every week to 10 days."
Ianazone said his McDonald-based pizza chain uses a blend of provolone and mozzarella cheeses shipped from Wisconsin. The company is paying almost $3 a pound for the cheese, nearly twice what it paid a year ago.
"I've had salesmen try to sell me something cheaper, a combination of real and imitation cheese. I say, no way," Ianazone said. "I don't like charging more, but I'd rather raise my price and keep my quality."
Customers at Rulli Bros. in Austintown have been asking about the higher prices on milk, cheese and other dairy products, said Michael Rulli, director of operations.
"Youngstown shoppers are very savvy," he said. "A lot of our customers are on a fixed income, and they notice when something goes up."
On average, he estimated, milk is up 5 percent to 10 percent, cheese is 20 percent higher, and butter is 15 percent higher.
Compensating
Large grocery stores like Rulli's Austintown store sometimes use milk as a "loss leader," selling it for a reduced price to draw more shoppers.
That's not likely now, Rulli said, because milk is so costly. Larger stores have an advantage because they can always switch to another product category for a loss leader, such as laundry detergent or paper products.
"It's a balancing act," Rulli said. "If you're giving milk away, you'll be very busy. You'll sell thousands of gallons, and hopefully the people will buy other things. But if you're losing a dime on every gallon, you have to decide if it's worth it."
Rulli said most suppliers and farmers he's talked to attribute the dairy price increases to higher diesel fuel prices that affect shipping costs.
He thinks large milk producers that ship their milk to the highest bidder are also having an impact. "It's a lot like OPEC and the oil," he said. "The big companies are keeping the prices up."
Making changes
McAllister, the Giering's Homemade Ice Cream owner, said he was paying $22.45 a case for his basic ice cream mix when he opened two years ago.
Now the commercial blend of cream and other basic ingredients costs $35 a case, and he'd be paying more than $40 if he hadn't increased production with the wholesale contracts.
"It made me get a little creative," McAllister said of the climbing costs. "One thing I've learned it's that you don't wait for people to come to you, you go to them. And they're out there."
Giering's is getting into the party business as another way to boost sales, serving up sundaes and ice-cream cones at graduation parties, showers and weddings.
Quantity sales also have helped diminish the pain of high dairy prices for Katie's Korner Homemade Ice Cream & amp; Yogurt, said president Keith Martin. "The milk prices haven't affected us because we do such large volumes," he said.
Starting in 1983 with a single ice cream stand in Liberty, the chain has grown to include 20 franchise stores and a wholesale distribution network stretching from Virginia to Michigan. Martin said the chain manufactures 600 gallons an hour at its Hubbard plant.
But he said prices have increased at Katie's outlets by about 10 percent this spring, the chain's first increase in two years, because of escalating nondairy expenses. Cones, paper, cocoa, whipped cream and shipping costs have all been climbing. Vanilla costs have more than tripled.
A single dip Katie's Korner cone costs $1.65, up from $1.50 a year ago. Still, Keith said the chain's customers don't seem to complain much about the higher prices.
"People know everything is going up," he said. "It's out of control."
vinarsky@vindy.com