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The well-stocked Iavarone Bros. grocery in Wantagh is battling rising costs for fuel and supplies -- flour has doubled and other food items have increased 15 to 30 percent. The store has posted notices to its customers explaining the reason for price increases. (Newsday Photo / Kathy Kmonicek / May 5, 2008)

The fresh-baked breads at the Iavarone Bros. specialty foods store in Wantagh often draw unsolicited praise from customers, who seem unruffled by any price increases.

Nevertheless, Joe Iavarone, one of several family members who run the four-store gourmet chain, feels compelled to explain to his customers -- in a somewhat apologetic note -- why they might have noticed price increases in the past several months.

"Flour prices are going sky high," reads the small note by the bread bins. "We are trying to keep costs down to help out customers, but it is very difficult."

Iavarone Bros., like other independent supermarkets and grocers, has seen the cost of flour more than double, the fuel surcharges on deliveries spike and just about every other food item increase in price from 15 percent to as much as 30 percent.

They are smaller and thus lack the buying power of the large supermarket chains and big discounters, like Wal-Mart, that buy products in bulk. These days, they have to work every angle possible to keep their costs down and stay competitive, they say.

That's a tough job for many of these specialty grocers, whose selling point often includes offering a variety of imported foods. And they are finding that a weakened dollar buys them a lot less.

"Everything coming out of Europe has skyrocketed," Iavarone said. " ... I try to absorb up to 10 percent of the raw materials cost, but it's difficult. Let's face it, there's a lot more competition from supermarkets and price clubs, and we don't want to price ourselves out of the market."

Owners and managers of these small independent stores say they are spending more time researching prices and vendors than they did before. If they have the space, they are buying and storing larger quantities of nonperishable items. Several have invested in new energy-efficient equipment and other technology designed to cut food preparation costs.

Nick Katopodis, a principal of North Shore Farms, a gourmet market, said he purchased an oil filtration system for the fryers in his new Glen Cove store eight months ago. The system saves him money and extends the life of his frying oil. Katopodis' company also owns a North Shore Farms in Port Washington and two other gourmet stores in East Norwich and Huntington.

Iavarone now keeps two pallets, instead of one, stacked high with bags of flour in the Wantagh store. He, too, recently purchased a $3,000 machine that cleans his frying oil. He installed a new air-conditioning system that saves energy and spent about $250,000 on a new refrigeration system that burns a lot less gas, he said.

At Gemelli Fine Foods in Babylon, the owners switched out their old light bulbs for more energy-efficient ones and also purchased a more energy-efficient refrigeration system, said Vincent Cosentino, a principal in the family-owned business.

Some grocers have been able to replace a few expensive imported items with less expensive domestic ones. But at stores that specialize in imported items like Limani Mediterranean Marketplace in Merrick, the options are limited.

Customers come to this small Greek food store to buy items produced largely in Greece. Owner Nektar Karagianes tries to make larger purchases of his dry goods and now buys less expensive olive oil made in Greece but packed in this country to keep the prices down.

"If the euro is high, it costs more to manufacture and pack, and they charge the distributors more, and that cost keeps adding ... to the point where I'm bringing in something that used to be a dollar apiece and now costs $3," he said.

His customers continue to come, but they make their visits less frequent and purchase fewer items, he said.

New Bakaliko, a Greek food store in Hicksville, also feels the burdens of being a small, niche store. The prices increase almost every week, said Chrystalla Miglis, who owns the store with her husband, George.

During the past year items like imported Greek honey have gone up 25 percent in price and some prices of imported olive oil have jumped by 40 percent. She has turned to local producers for some baked items and prepared foods like shish kebab, which she says is cheaper, fresher and is of a higher quality.

Like Karagianes, Miglis noticed that her customers aren't buying as much. And they hardly ever use cash, she said. "They always give the credit card. Sometimes they ask, 'Can I pay half with the card and half with cash?'"

High fuel prices pressured consumers to combine shopping trips and errands and eat out less in 2007, according to a survey by The Nielsen Co. But customers like Ana-Maria Hurtado, a native Chilean who lives in Freeport, still shop at the Spanish bodegas near home for items like chorizo, dulce de leche, tropical fruit juices and certain seasonings. Hurtado says she has been going less frequently because she is beginning to find some of these products in the larger supermarkets.

Still, a number of independent specialty stores say their prepared food items are selling well, and they are increasing the types of items they make in-house to ensure quality and keep costs down.

Many analysts believe large regional supermarkets should also focus on offering ready-to-eat items during an economic downturn, said Jenny McTaggart, a senior editor with Progressive Grocer, a national trade magazine for the supermarket industry.

"Ready-to-eat is very important for supermarkets because if people are wanting to eat out less, they might be more likely to pick up a meal" that costs less than a restaurant meal, Taggart said.

Rising prices across the board have shifted shopping habits, but customers are still looking for value, said Phil Lempert, founder of the Web site SupermarketGuru.com and the food editor at NBC's "Today Show." Prices will eventually level off, but they won't return to previous levels, he said.

"People are shopping smarter, using coupons, eating home rather than going out," Lempert said. "We're seeing a blend of convenience and home cooking. That might be buying prepared meatloaf and [cooking] my own vegetables; a mix and match, if you would."

Consumers like Jack Mandel, a marketing consultant and Nassau Community College professor, said there are still many Long Islanders who find value in shopping at a specialty or gourmet store. He said he spends a little more to shop at gourmet markets because he is getting a culinary experience and customer service.

"If I pay $4.79 for high-test gasoline, then I'm willing to pay another buck for quality meats or fresh fruit," he said.

Of interest: In 2007, independent grocers made up about 18 percent of the nation’s 34,967 supermarkets and brought in $29.7 billion in revenues, about 5.5 percent of total supermarket sales.