Hawaiians hit by skyrocketing shipping costs

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Honolulu (CNN) -- Ever wonder why everything at the grocery store seems to cost more these days? Blame it on, what else? - the price of fuel. The cost of shipping food is skyrocketing. And it's a domino effect from the farmer, to the shippers, to your local restaurants and supermarkets.

And it takes multiple steps to get fresh-grown fruits and vegetables from California's farms to Hawaii's stores. And nearly every step along that chain is feeling the effects of high fuel prices.

You can smell the fresh fruits and vegetables poking through the boxes at Kennedy Produce. It's a family business that Tim Kennedy's dad started in the 1950s. Tim buys produce from all over the country, brings it into his warehouse and then reloads it onto air and sea cargo containers to ship to Hawaii.

Every week it costs more and more to fuel those ships and planes. Kennedy says, "It's a chain. It starts on one end and ends up at the consumer at the checkout stand. But that has to be how it works. I can't absorb it. I've taken some increases and absorbed those and not passed them on. But as they continue to come, they have to go somewhere."

Kennedy ships cucumbers and carrots, potatoes and peppers, grapes, oranges, lettuce... you name it, he sends it from California to Hawaii. On the other end is Allen Woo, sales manager for Manson Products. Woo is a wholesaler who picks up Kennedy's shipments in Honolulu and turns them around for schools, restaurants and stores. Woo and Kennedy say the fuel surcharges are driving their prices through the roof. Woo says shoppers don't understand how much it now costs to have a ship carry cargo across the Pacific Ocean.

"They think that we're making too much money, when actually they don't understand the freight is just so expensive. It's not like what it used to be 3 years ago. The surcharge a few years ago was $432. Next month it'll be $1600."

In a couple weeks, fuel surcharges will rise again - to over 38%. That means that an overseas container that costs about $4200 will have surcharges slapped on for $1,618. And it doesn't get any cheaper flying. Woo says air freight's fuel surcharges have gone up 25% from a year ago.

Woo says he's going to have to change the way he does business. "Right now we're delivering 6 days a week. We may go to 5 days a week, or even 4 days a week. Just to save ..to save on gas." He's also considering implementing an additional fuel surcharge of his own - that would be tacked on to what those stores and restaurants are paying to get their produce. "Ultimately it is passed on to the consumer," Woo says.

The high cost of fuel has a ripple effect that's hit some shippers hard. Aloha Airlines used to shuttle freight at night, between Hawaii's different islands. Tim Kennedy says he relied on them quite a bit - before high fuel prices drove the airline out of business last month. "And when they shut down, we had product stuck. So we had to move it on the barge system. But that just adds more days to the product, with greater chance of losing freshness and spoilage."

Shippers like Kennedy say even if you're paying more at your local grocery store or favorite restaurant ...they're not making any extra money. Kennedy says if he's selling a case of lettuce for $10, he maybe makes a dollar on the deal. If the price goes up to $15, he's still only taking his one dollar profit.

But the small businessman has managed to find some new opportunities amid the bad news. High prices have pushed down demand, which leaves some shippers with half-empty containers. Kennedy says the fact that they can't fill their containers creates some potential new customers. "They're coming to me to say 'Can we share room? Can we, you know, buy some space from you, to get our product in?'"