Groundwork on New Inflation Report: Big Corporations Cash In While Consumers Pay the Price

May 11, 2022 Groundwork Collaborative

Today’s Consumer Price Index (CPI) shows year-over-year inflation at 8.3%, a slight decrease from 8.5% the previous month. Groundwork’s Chief Economist Dr. Rakeen Mabud reacted with the following statement: 

“This morning’s inflation report shows that megacorporations are still taking advantage of this moment to cash in – at the expense of consumers, families, and small businesses. On corporate earnings calls, their strategy is clear: they aren’t just passing along rising costs to consumers; they are going for more.” 

Read Groundwork’s new Q1 report on corporate prices and profits here and email to set up an interview with Dr. Mabud.

Groundwork’s New Research on Inflation and Corporate Profiteering:

  • The CEO of 3M, maker of masks and medical equipment, bragged on the company’s Q1 earnings call that the “team did an amazing job” driving higher prices which have “more than offset the amount of inflation.” 
    • 3M is “already working on higher prices” to expand its profit margins even further. 
  • Kimberly-Clark is well-aware that higher prices will “create stress on the consumer,” but that hasn’t stopped the company from implementing “multiple rounds of pricing” on essential products families cannot do without, like diapers. 
    • The company exceeded investor expectations in Q1, sending its stock surging 9% on the back of their earnings release and higher financial expectations for 2022. 
  • Credit card giants Mastercard and Visa have found inflation to be “net-net, a positive” as prices rise, consumers continue to spend and family budgets get stretched to a breaking point: 
    • Analysts view Visa as a major pandemic beneficiary as it continues to beat earnings expectations and its stock rises with higher fees and interest rates.
    • Visa and Mastercard, which control more than 70% of the credit card payment market, have doubled their revenues from merchant fees and processing fees over the last decade.
  • Nestle, the world’s largest food company, credited strong Q1 sales numbers to “increased pricing” – which they will continue to do “with the best interest of shareholders in mind.” 
    • Nestle’s CEO blamed the war in Ukraine, inflation, and rising labor costs on higher prices – but told investors that price hikes would maintain the company’s fat profit margins and its billions in stock buybacks.
  • Paint company PPG Industries stated that “we’re not going to be giving this pricing back” as the cost of raw materials decreases because the higher prices are “being accepted by our customers.” 
    • PPG beat Wall Street’s earnings expectations this past quarter, which it has done in four of the last five quarters.
  • Industrial real estate giant Prologis stressed the benefits of the war in Ukraine – which has increased demand for industrial rental spaces: “So there’s a lot of emotional angst in Europe. It’s all understandable, but the business is pretty good.”
    • Even before Russia’s invasion of Ukraine, Prologis more than doubled its profits from 2020 to 2021 as real estate boomed and inventory demand went up.