It’s been more than a year since the U.S. launched its battle against high inflation. Yet, nearly every grocery item still costs more than it did in the past.
A bag of potato chips that could have been purchased for $5.36 last year will cost you $6.17 today. A dozen eggs that used to cost $2.01 now sets you back $4.21. A pound of butter went from $3.77 to $4.87.
Across the country, the high grocery prices have crunched budgets for essential food items. But at the same time, some of the largest food corporations are raking in profits. Experts say those profits are helping to make your groceries even more expensive.
“Follow the money, and the story is clear,” Robert Reich, the former US. Labor Secretary, tweeted last week. “Food corporations are using inflation as cover to jack up prices.”
On Tuesday, Conagra Brands—one of the largest consumer packaged goods companies in the U.S.—announced that it had posted a nearly 60% year-over-year profit increase between December 2022 and February 2023. The Chicago-based company, which makes a long list of grocery staples including Chef Boyardee, Hunt’s, Slim Jim, Reddi-wip, and Marie Callender’s frozen meals, reported a net income of $342 million, up from $219 million in the same quarter a year prior.
Conagra attributed the rise in quarterly profits to inflationary price increases, despite facing more impactful supply chain disruptions than anticipated. Sean Connolly, Conagra chief executive, said on the earnings call with shareholders that the company’s sales growth was “primarily driven by inflation justified price increases” and a willingness by consumers to pay the higher prices. Conagra did not respond to a request for comment.
Connolly added that “while these inflation cycles are painful for manufacturers to go through to a degree, sometimes they’re actually quite good for you because they become a catalyst for getting your pricing right.”
Conagra isn’t the only food company making profits off of inflation-driven price increases. At Kraft-Heinz, the multinational food company that makes Oscar Mayer, Jell-O, and Kool Aid, profits for the quarter ending at the end of 2022 were up nearly 450%, compared to the prior year, at $887 million. Tyson Foods, the largest meat company in the U.S., more than doubled its profits between the first quarters of 2021 and 2022. And General Mills, which owns Kix, Trix, and Chex among other recognizable cereal labels, saw its fourth quarter profits last year rise 97% compared to the previous quarter. General Mills has raised prices five times since 2021 and indicated last month that another price hike could be coming soon. (Profits fell for both Tyson and General Mills in the most recent quarter, however.)
Over the last year, the price of food eaten at home has soared more than 10%, according to the Bureau of Labor Statistics, with some items spiking even higher. Cereals and bakery goods are up 14.6% from a year ago, closely followed by dairy and nonalcoholic beverages, which have both risen 12.3%. The other major grocery store food groups—meats and fresh produce—are up 6.8% and 5.4%, respectively. Prices increases have slowed in recent months, but show no signs of going back to pre-pandemic levels.
The trend shows that the packaged food industry is benefitting from passing the price increases along to American consumers. And as more food companies are reaping the rewards of higher profit, it could result in your grocery prices staying at these inflation-driven levels for longer, says Chris Becker, a senior economist at Groundwork Collaborative, which promotes left-leaning economic policies.
“When shareholders see that other corporations are getting away with high pricing, they start wanting to get in on it,” he says. “So other corporations then raise prices to deliver profit margins.”
In other industries, like electronics and home furnishing, consumers are likely to cut back on spending if prices are too high. But that hasn’t been as big a concern among food industry executives, Becker says, since people will always need to spend on groceries in order to live.
“Food companies are taking advantage of this very precarious moment,” says Irit Tamir, Director of Oxfam America’s private sector department, which seeks to fight inequality to end poverty and injustice. “They are hiding behind a very good story of the pandemic, inflation, and the Ukraine war to say that they need to raise prices, but they are actually just creating a smash and grab for profit, exploiting and exacerbating inflation.”
And it’s not just packaged food manufacturers that are experiencing a recent profit boom thanks to rising prices, says Joe Maxwell, the president of Farm Action, a nonprofit that campaigns against corporate influence in the farm industry. Some food producers and suppliers are also reaping the same rewards.
Cal-Maine Foods, the largest egg producer in the U.S., reported that its revenue doubled and profit surged 718% last quarter because of higher egg prices. The company, which controls about 20% of the U.S. egg market, said its average selling price for a dozen eggs in the quarter ending Feb. 25 was $3.30, more than double the average of $1.61 a year earlier.
The company has pointed to decreased egg supply nationwide due to avian flu as the reason for higher prices and record sales. The avian flu, which is tearing through poultry farms across the U.S., wiped out some 58 million birds in the last year. But Farm Action believes that there’s another culprit: price gouging. In a January letter to the Federal Trade Commission (FTC), the organization alleged that Cal-Maine Foods is engaging in “a collusive scheme among industry leaders to turn inflationary conditions and an avian flu outbreak into an opportunity to extract egregious profits.”
Maxwell, who was the last Democratic Lt. Governor of Missouri, says that the food and agriculture industries have become so concentrated into a few large companies that there’s no longer an incentive to gain market share by competing on price. “The market dynamics do not work,” he says. “Today a primary cause of food inflation in this country is the market concentration that allows for price gouging.”
Democratic lawmakers Sen. Elizabeth Warren and Rep. Katie Porter called out Cal-Maine and other major egg producers for more transparency into their profitability. “American families working to put food on the table deserve to know whether the increased prices they are paying for eggs represent a legitimate response to reduced supply or out-of-control corporate greed,” they wrote in a letter in February.
“Companies have admitted that they are raising prices not because of costs, but because they can,” Tamir says. “They are essentially hiding behind a lot of these excuses as a way to gouge consumers.”
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