Price gouging hurts food program

Would you pay $9.94 for a box of Cheerios? How about $8 for an 18-pack of corn tortillas?

Small grocery stores in the Bay Area have found a way to work the system and take advantage of the state’s Women, Infants and Children program, and now the state is racing to stop them.

California’s $1.1 billion WIC program provides vouchers exchangeable for food staples to 1.48 million low-income Californians. The federally-funded program is the largest of its kind in the country and is losing obscene amounts of money every year because of grossly inflated food prices and predatory marketing schemes.

Grocery stores voluntarily enter the WIC program. In recent years, California has seen an increasing number of smaller grocery stores applying to join. Smaller grocery stores — with two or fewer cash registers — receive higher reimbursements from the state than big-box grocery stores.

After being swamped with applications from stores to join the program, the state imposed a moratorium on new vendors last April.

One diabolical tactic of some stores in the WIC program is aggressive marketing aimed at WIC families. “Rewards” for shopping at their stores —  in the form of small appliances or free junk food, undermining the program’s health aspects — lure customers into using WIC vouchers to purchase food items at incredibly inflated prices.

The Bay Citizen caught Rancho Grande Supermarket in San Pablo selling an 18-pack of tortillas to WIC shoppers for $7.80, while a FoodMaxx less than a mile away sold the same tortillas for $1.44. Rancho Grande was selling 64-oz bottle of Orange Juice to WIC customers for $7.99. In another part of the store for non-WIC shoppers, the same bottle of orange juice was $4.69.

Because the WIC vouchers do not represent a dollar amount, shoppers using them have little incentive to seek out reasonable prices. The extra dollars of pure profit are passed on to taxpayers.

Earlier this month, California took action by limiting how much stores with fewer than four registers can be reimbursed for WIC products. The new guidelines take effect May 25.

According to the US Department of Agriculture, this change could have saved California an estimated $50 million in 2011 alone, but some people remain skeptical that the new guidelines will significantly improve the problem.

Art Burger, executive vice president at Burger, Carroll & Associates, a New Mexico-based consulting firm that works with WIC programs around the country is one of the skeptics:

“The best and most expedient approach would be for the governor of California to ban incentives on WIC transactions.”

He reasons that without offers of free cheese or blenders, customers would be less likely to shop at places like Rancho Grande in the first place.