Reasons for High Food Prices in the U.S. Virgin Islands

In response to a congressional request, GAO held discussions with, and obtained documentary information from, officials of a number of different sources to determine why food prices in the Virgin Islands are so high.

Nearly all products consumed, processed, and sold in the Virgin Islands must be procured from off-island areas. The majority of island freight is transported by ship via Puerto Rico where the cargo is often off-loaded and reloaded onto smaller vessels for shipment to the islands. Cargo between Puerto Rico and the Virgin Islands moves primarily in one direction only, thus sufficient revenue must be generated from the cargo moving to the Virgin Islands to cover the costs of the round trip. There are only two major supermarket chains in the islands, and many of the smaller grocery stores purchase their merchandise from the two large chains for resale. In December 1981, retail prices of commodities in the Virgin Islands averaged 45 percent higher than food prices in Washington, D.C. Poor food quality on the islands is attributed to the rigors of handling in shipment. GAO found that the high cost of food on the islands can be attributed to high shipping charges, price domination by major supermarkets, high rates of shrinkage, high operating costs, inefficiencies due to the small size of the market, affluence, tourism, a high incidence of food stamps in the islands, and little consumer resistance to high prices. Better management of food transportation and marketing, increased agricultural production, increased exports, and the development of a higher level of consumer sensitivity and organization could alleviate some of the problems.