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Safeway's coffee index shows improved economy

October 15, 2009 |  3:08 pm

How will we know when the recession is ending? Watch the coffee index, says Steven Burd, chief executive of Safeway Inc., the Pleasanton, Calif., supermarket company that owns Vons here in Southern California.

Speaking to investors about Safeway's third-quarter profit, Burd said shoppers were starting to trade up to more expensive items after a long period in which they have gravitated to less costly goods.

"When we went into the recession, we saw a change in the mix of lattes versus coffee, and now we've seen -- it's early but we're seeing -- a trend back to lattes," Burd said.

Wine is another area in which people are starting to change buying patterns.

At the start of the recession, the percentage of premium wines Safeway sold declined, he said.

"Our wine category has been a fabulous category for us for years, but we saw a mixed change with a reduction in premium wines and we've now seen that reverse itself," Burd said.

Taken together, the two examples of shoppers trading up in their selections "suggests to me, that we're at, or near, the bottom of this whole thing, and that would be good for all of us if that's true," Burd said.

Safeway's financial results, which reflected what was going on the economy during the three months ended Sept. 12, were still on the downswing.

The company said it earned $128.8 million, or 31 cents a share for the quarter, down from $199.7 million, or 46 cents, a year earlier. Revenue declined 7% to $9.46 billion.

Sales at stores open at least a year, a key measure of a retailer's health, fell 3%, excluding gasoline sales.

“Safeway’s sales remained soft, driven largely by deflation in dairy, produce and meat, and a sluggish economy,” Burd said. “However, we are encouraged that our household and transaction counts increased in the quarter."

-- Jerry Hirsch