A penny, a dime, a nickel—that’s how the average shopper experiences higher food prices. It’s like a nibble, steadily eating away at their checking account over days, weeks and months.

This worries guys like Clem Nilan. As the general manager of City Market/Onion River Co-op in Burlington, Vt., Nilan’s job is to ensure the shelves stay stocked with all the natural, organic, locally grown and other foods his shoppers expect—all while keeping prices at a level customers are willing, and able, to pay.

As other natural products retailers know, accomplishing this goal is becoming increasingly difficult. But not only is Nilan dealing with the spike in global food prices that began hitting early last year, he is also still feeling the effects of Hurricane Irene, which last August devastated many of the New England farms that supply City Market. As a result, Nilan has been forced to contend with double-digit cost increases on some items, including recently turkey and milk.

“Sometimes it’s just price creep,” Nilan says. “Then all of a sudden you look and say, ‘You know I had this on sale at Thanksgiving last year and now this is what I’m paying for it wholesale.’”

Sage Horner of the growing natural products retail chain Sunflower Farmers Market says that sudden cost increases in produce posed a challenge for the supermarket chain in 2011. Although the government expects some food price increases to abate in 2012, the cost of beef, chicken and pork continue to stay high.

“It seems to me that we’ve been at almost historic highs in cost in the protein markets,” says Horner, who is vice president of merchandising and supply chain at Phoenix-based Sunflower. “It’s the feedstocks, the grain, the fuel, the transportation, the cold-storage expenses. All of those things have come along and exacerbated some of the cost dynamic.”

Economy elevates food price issue

Higher costs are never welcome news for retailers, but the current economic climate makes the situation even more problematic. Historic levels of joblessness and stagnant wage growth means the typical American household is bringing in about $2,700 less than they did before the recession, according to the Economic Policy Institute. As a result, people are spending an average of 3.1 percent less on consumer items than they did in 2007.

Initially, major grocery chains were reluctant to pass these higher prices on to consumers, choosing instead to absorb the cost, particularly on natural and organic items. Meanwhile, retail prices at natural foods stores were up by as much as 1.7 percent, according to SPINS LLC, which tracks the average “basket price” of products within the natural and organic category.

“Over the last year, prices have been fairly flat in the conventional grocery channel, whereas in natural they’re up about a buck for a basket versus a year ago right now,” says SPINS analyst Mike Addona. But as the hopes of a near-term economic recovery grew increasingly unlikely last year, the supermarket industry as a whole began setting prices this past fall that more accurately reflected wholesale costs.

Overall in 2011, the price of food at checkout went up by between 3.5 percent and 4.5 percent, the biggest jump since 2008. The U.S. government is forecasting a slightly smaller food inflation rate of 2.5 percent to 3.5 percent in 2012. That’s good news, unless you’re a consumer who’s already struggling under the current high prices, says Corinne Alexander, an agricultural economist at Purdue University. “You jump up a price level and you jump up a [another] smaller price level,” she says. “But you look at the combined increase over those years, and it’s substantial.”

According to an opinion poll released by Oxfam International, 31 percent of Americans say they have changed their diet because of rising food prices. Meanwhile, four out of five consumers surveyed by business consultancy Accenture reported feeling concerned about rising food prices. Seventy percent of respondents said they would change shopping behaviors if food costs continue to rise.