My wife and I ride like 5 or 6 miles (roundtrip) to Target for cheap cereal and kitty litter. Other stuff, like milk and veggies, we get at closer corner marts.

For our bike grocery runs we just use our big EMS (eastern mountain sports) bags, and pack em full. I can carry an 8lb. thing of cat litter in my bag. heh...

click the link for a pic of our madness
http://flickr.com/photos/sethw/12690691/in/set-162608/

I don't ride that bike anymore - no more panniers or rear rack