Groundwork’s Lindsay Owens: “There is still more the government can do to reduce food and grocery concentration and stop the cheating that is costing families dearly”
August 16, 2024
Groundwork’s Lindsay Owens: “There is still more the government can do to reduce food and grocery concentration and stop the cheating that is costing families dearly”
NEW Fact Sheet: Corporations Are Driving the High Prices
Groundwork Collaborative Executive Director Lindsay Owens released the following statement concerning the persistently high costs of everyday essentials like food and groceries, even as inflation has cooled. Groundwork also released a fact sheet today that shows how corporations have kept prices needlessly high in order to reap record profits.
“Price gouging, price fixing, and just plain profiteering are rampant in the food and grocery sector.
“When just a handful of big companies control the majority of the market, or even control the market in a single region, they have the power to raise prices without worrying about a competitor nipping at their heels. As we’ve seen with eggs, sugar, chicken, beef, and more, price fixing is rampant in this sector.
“The Biden administration has taken aggressive action to stop price-fixing and consolidation in the food and grocery sector, such as by blocking a merger between grocery giants Kroger and Albertsons. But there is still more the government can do to reduce food and grocery concentration and stop the cheating that is costing families dearly.”
Owens testified in May before the Senate Banking Subcommittee on Economic Policy on the ways in which rampant corporate concentration in food and groceries has enabled the big players to gouge, deceive, even cheat customers into paying higher prices – and how corporations have kept those prices high, even as input costs have come down.
Email press@groundworkcollaborative.org to speak to Lindsay Owens.
CORPORATE PRICE GOUGING FACT SHEET
Corporate profits are driving high costs even as input costs are declining
- Corporate profits drove 53% of inflation during the second and third quarters of 2023 and more than one-third since the start of the pandemic.
- Historically, corporate profits accounted for only 11% of price growth in the 40 years prior to the pandemic.
- Corporate profits as a share of national income has increased by nearly 30% since the start of the pandemic.
- In 2023, Consumer prices rose 3.4% over the year, while input costs for producers increased by only 1%.
- The labor share of income, after rising during 2020, has declined since 2021 and appears to be at or below pre-pandemic levels. In 1947, workers used to get about two-thirds of income from their labor but it’s now just a little over half.
- Corporate profits as a share of GDP remain near postwar highs.
Food prices have battered consumers as profits surge
- Grocery prices have risen 25% since the pandemic began.
- In 2022, consumers saw the largest annual increase in grocery prices (nearly 12%) since 1978. That spike contributed to a 45% jump in food insecurity between 2021 and 2022.
- Five categories drove nearly 30% of grocery inflation: beef and veal; poultry; non-frozen non-carbonated juices and drinks; fresh fruits and vegetables; and snacks.
- A Guardian report of 36 top US food corporations found their net profits went up by a median of 51% since pre-pandemic, while wages are up roughly 5% from inflation’s peak.
- Up to 10% of inflation in key product categories can be attributed to reducing product sizes while maintaining or increasing prices. For example, General Mills reduced its ‘family size’ cereal boxes from 19.3 ounces to 18.1 ounces without changing the price. PepsiCo shrunk Gatorade bottles from 32 to 28 ounces while increasing their price.
Industry consolidation has increased companies’ pricing power
CEOs are boasting of their price hikes on earnings calls to investors
- Hostess Brands CEO: “Pricing, by definition, is a change model. It’s temporary. Consumers get used to it. When all prices go up, it helps.”
- Kimberly Clark CEO: “If the price goes up on bath tissue, generally doesn’t mean you’re going to use the bathroom less, right?”
- Colgate-Palmolive CEO: “What we are very good at is pricing… we have found ways over time to recover that in our margin line.”
- PepsiCo CEO: Consumers “might be paying less attention to pricing as a decision factor, and they might be giving more relevance to the brands or brands that they feel…closer to…more emotionally attached to.”
- Constellation Brand CFO: “…we’ll take as much pricing as we think the consumer can absorb.”
- Visa CEO: “So inflation typically lifts transaction size… historically, inflation has been positive for us.”
- Nestle CFO: “…let’s not forget that our gross margin had fallen by 400 basis points till the end of last year, which means that this is not the time to talk of significant pricing decreases.”
- 3M CFO: “The team has done a marvelous job in driving price. Price has gone up from 0.1% to 1.4% to 2.6%.”
