Mellody's Math: Is Bulk Buying Always Better?

July 19, 2004 -- Although mortgage and car payments are generally the big-ticket items in a household budget each month, groceries can add up too.

A family of four typically spends an average of $500 to $1,000 on groceries each month, according to the U.S. Department of Agriculture. The amount depends on whether they are thrifty or more liberal with their spending.

So how do you make your money go the farthest? Most consumers believe buying in bulk and bigger sizes always saves money, as evidenced by the rising popularity of warehouse shopping. However, buyer beware: this is not always the case. In fact, buying bigger can sometimes mean a bigger price tag.

Bigger Is Not Always Better

It is important to dispel a key assumption made by many shoppers. For example, a recent survey of a Chicago-area grocery store found that an individual bag of Lays potato chips costs 25 cents. However, if you were to buy the "snack pack" containing eight bags of the same chips, you would end up spending 37.4 cents per bag, which is 35 percent more.

Mellody's Math — Snack Savings: Assuming your child takes a bag lunch to school every day of the week during elementary and middle school, you would pay more than $175 in unnecessary chip costs over the period if you purchased the variety pack instead of each bag separately.

Likewise, if you buy a 60-pack of Huggies baby diapers, you pay about a penny more for each diaper than if you were to buy a 40-pack.

Mellody's Math — Diaper Dollars: Assuming an average of eight to 10 diaper changes a day, your baby will go through roughly 9,000 diapers in his or her first 2 ½ years. As such, if you purchase the mega pack of diapers instead of the standard package, you will spend an additional $72 on your baby.

Medium Money Savings

The least expensive size often falls somewhere in the middle.

In the case of Crest toothpaste, the mid-sized tube of toothpaste (6.4 oz.) provides you with the most toothpaste for your money, at 39 cents an ounce, whereas a smaller tube (4.6 oz.) costs 52 cents per ounce and the largest tube (8.2 oz.) is 44 cents per ounce.

The same premise holds true for toilet paper and mayonnaise. While a small four-pack of Charmin toilet paper is clearly the most expensive (42 cents per 100 sheets), the largest size, a 24-pack, is not the least expensive (18 cents per 100 sheets). You actually get the most for your money when you buy the 12-pack (17 cents per 100 sheets).

If you're in the market for mayonnaise, go for the 32-ounce jar as it will cost you 12.5 cents per ounce, versus 21 cents an ounce for an 8-ounce jar and 14 cents an ounce for a 48-ounce jar.

While these differences may seem small per item, they can add up to significant amounts over the course of a year so it is important to do the math before making your selections. Additionally, with most major grocery store chains using bar codes for pricing purposes, it is especially important to look at the prices on the shelves before throwing items into your cart to ensure you are getting the best deal. The bottom line: regardless of where you shop, it is important to look at the unit price not just the size and the overall price.

When Bulk Is Better

While bulk is not always better, a membership to a warehouse store like Costco can buy you some savings. At $45 a year for a standard Costco membership, you can find some extraordinary bargains, especially when it comes to everyday household items, such as salt and bleach. For example, for only 60 cents more, a shopper can get over twice the amount of Clorox bleach by purchasing it at a warehouse store. Mellody's Math — Salty Savings: If you were to purchase Morton's Salt at Costco, you would walk away with four pounds of salt for just 89 cents. However, if you wanted to buy four pounds of Morton's Salt at a local Chicago grocery store, you would spend $3.80, which is more than four times more expensive.

Negated Savings

In addition to the higher cost of some bulk products, there is the issue of space as well — a lack of it. In order to insure your bulk food products stay fresh, they must be stored safely. Items such as rice and pasta should be kept in cool, dry places and frozen foods should be kept at 0 degrees Fahrenheit or below, not 32 degrees. Similarly, refrigerated items should be stored at 41 degrees Fahrenheit or below. In addition, it is never a good idea to crowd the refrigerator or freezer so tightly that air cannot circulate.

In addition to temperature requirements, items like eggs, meat and cheese can be kept safely refrigerated for up to seven days, according to the Food and Drug Administration (FDA). Items purchased in bulk, like condiments and cereal, vary in their expiration dates.

For example, how long do the warehouse stores' famous gallon jars of pickles last? An opened jar of refrigerated pickles has a shelf life of no more than four to six months — not a very long time to finish a gallon of them! The bottom line is: ask yourself if you and your family can really use a gallon of pickles or mayonaise (two-month shelf life) before they expire.

Some additional storage tips

It is important to note there is no uniform or universally accepted food dating system in the United States. According to the FDA, although 20 states require food dating, there are many parts of the country with no such requirements.

Additionally, the date posted on most food (with the exception of infant formula and baby food) is not a "safety date" but a "suggested" date for the consumer to evaluate the likely freshness of a product. For specific guidelines, visit the Federal Drug Administration's Web site (www.fda.gov) to view a host of consumer tips on safe food storage.

E-mail Mellody with your personal finance questions.

Mellody Hobson, president of Ariel Capital Management (arielmutualfunds.com) in Chicago, is Good Morning America's personal finance expert. Ariel associates Matthew Yale and Aimee Daley contributedto this report.