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Prices at the supermarket keep rising. So do corporate profits.

Is it really inflation? Or something else?

Digital generated image of vertical bar graph made out of golden cubic blocks with shopping carts standing on them against light blue background. Getty Images
Whizy Kim is a reporter covering how the world's wealthiest people wield influence, including the policies and cultural norms they help forge. Before joining Vox, she was a senior writer at Refinery29.

It’s not just eggs that have been eye-poppingly expensive due to inflation. The literal bread and butter of the American diet cost much more today than it did just a couple of years ago: The average price of white bread was about 22 percent higher in January than it was two years ago, and flour is up almost 21 percent. Butter cost 31 percent more.

Ordinary Americans have been watching their grocery bills climb to new heights as prices rise on cereals, meat, dairy, fruits, and vegetables — virtually everything we eat. According to the US Department of Agriculture, the price of food for home consumption rose by 11.4 percent last year — the highest yearly percent change since 1974 – and it’s expected to rise by another 8.6 percent in 2023. Compare that to the last two decades, when average year-to-year food price inflation was 2 percent. Consumers are at the limit of what they can afford.

For the most vulnerable families, the squeeze at the grocery store has become that much more dire. A recent survey of American households that receive food stamps conducted by financial software company Propel showed that almost a third were skipping meals, eating less, or relying on food banks as food prices balloon. On March 1, a pandemic boost to the food stamps program ended, and households will now on average have $95 less per month to spend on food.

Food companies say their price increases merely reflect how much their costs have gone up due to “inflationary pressures,” like higher labor costs, transportation delays, and capacity issues, or the higher price of grains and animal feed. Yet inflation in 2022 outpaced the rise in wages in most industries, and the prices of many agricultural commodities have come down.

The eyebrow-raising spikes at the grocery store can only partly be blamed on manufacturers’ higher costs. The inflation narrative offers the perfect jumping-off point for companies to raise prices, and major food manufacturers are taking advantage of the moment to boost their profits.

The proof? Look at just how rich companies have gotten since the start of the pandemic.

Who exactly is making money off your expensive food?

Chances are, you’ve bought a product that the food giant Cargill has had a hand in sourcing or processing, whether it’s wheat, soy, cocoa, feed for livestock, or the meat that ends up in grocery stores and restaurants. In fiscal year 2022, its revenue reached a record $165 billion. A record $6.68 billion of that was profit, double what its profits were in 2020. Its shareholders received $1.21 billion of those profits in dividends — yet another record.

“Corporate profits have hit their highest level ever, and corporate profit margins — how much they’re making on each unit that they’re selling — have hit the highest level in 70 years,” said Chris Becker, senior economist at the Groundwork Collaborative, a progressive economic advocacy organization.

Tyson Foods, the largest meat company in the US, also more than doubled its profits between the first quarter of 2021 and the first quarter of 2022. Packaged foods manufacturer General Mills, which owns a variety of cereal brands as well as food brands like Annie’s, Betty Crocker, Chex, and Bisquick, has raised prices five times since 2021 and indicated another price hike could be coming soon. At the end of last year, its profits were up 97 percent compared to the previous quarter, and up 16 percent annually. Conagra, which owns packaged food brands like Healthy Choice, Duncan Hines, and Reddi-wip, noted a 22 percent profit increase in its last quarterly earnings report. Grocery giant Walmart — the largest US corporation, bar none — has seen its profits grow for the past several years, with a 7 percent jump between 2020 and 2021.

It’s not just companies growing richer. Food billionaires — the people at the top of the food chain at many of these companies — have grown exponentially wealthier, too.

The seven billionaire members of the Walton family, which owns Walmart, have a combined net worth of $238 billion, according to a recent Oxfam report, and their wealth increased by $8.8 billion between 2020 and 2022.

For the past few years, Oxfam’s annual reports on global inequality have emphasized the windfall profits that food corporations and the individuals who run them have made during the pandemic. The Cargills, some of the food industry’s most powerful players, are a very good example. Almost 90 percent of their namesake food and commodities trading company is owned by family members, who have all been enriched thanks to their stake in the largest privately held company in the US.

Today, there are four more billionaires in the Cargill family than there were in 2020, bringing the tally up to 12 billionaire heirs.

The Mars family, whose company makes candy (3 Musketeers, Skittles, M&M’s, Snickers), packaged food (Ben’s Original, Tasty Bite, MasterFoods), pet food, and more, boast six billionaire members who are together worth about $115 billion. Between 2020 and 2021, they added $21 billion to their fortunes.

“During the pandemic alone, billionaires involved in the food and agribusiness sectors — just those billionaires — increased their wealth by at least $400 billion,” said Nabil Ahmed, director of economic justice at Oxfam America. “We’ve seen 62 new food billionaires created during the pandemic.”

How food monopolies affect prices

Why are corporate profits so high at a time when regular people feel increasingly strapped? Because a small number of players have gobbled up most of the food chain. Cargill and just three other agribusiness companies control about 70 percent of the world’s agriculture market, according to Oxfam. Brands like PepsiCo, Nestle, Mondelez, and Conagra produce and market the vast majority of the offerings found in US grocery stores.

“We look at the supermarket shelf, and we might be buying tea, cereal, whatever it might be, and we think, ‘Oh, I’ve got a real offer of choice here on the product I want to buy,’” Ahmed, of Oxfam, told Vox. “Frankly, it’s an illusion of choice, because so many of those products are actually owned by the same company.”

Grocery retailers, too, have become increasingly consolidated. The ongoing Kroger-Albertsons merger, which could be blocked by the FTC, for example, has raised alarm bells from consumer advocates; if the merger goes through, Kroger-Albertsons and Walmart together would control 70 percent of their industry. In fiscal year 2022, Kroger’s operating profit was $4.1 billion — in 2021, it was $3.5 billion. Since the pandemic began, Kroger has paid billions in dividends to its shareholders.

Evan Wasner, a University of Massachusetts-Amherst economist who authored a recent paper on companies’ price-setting power with economist Isabella Weber, said that companies tend to raise prices when they think they won’t see a huge backlash — like when everyone else is hiking prices, too. “In a sense, economy-wide cost increases act as a kind of coordinating mechanism which allows firms competing with one another for market share to safely raise prices together,” said Wasner.

Companies are aware that shoppers are seemingly willing to accept the sticker shock at the grocery store — as long as there’s apparent justification for it. In February, General Mills’ CEO noted to analysts that consumers hadn’t pushed back against higher prices in the previous few quarters.

Market dominance makes the supply chain more brittle, too, because it means there are just a few vulnerable points for failure. Last year’s baby formula shortage is an example of how dangerous the results can be. Just two US companies control about 80 percent of the market, which meant that when one manufacturing plant shut down, the entire nation struggled to buy baby formula.

Becker blames the vulnerable state of supply chains in part on market deregulation over the last several decades, which has enabled companies to cut corners. In the 1980s, the growing popularity of “just-in-time” inventory systems, where companies order just the amount of inventory needed right now without a buffer, allowed companies to become more efficient. That has meant lower prices for consumers, usually, and higher profits for companies — until a crisis hits, and suddenly there are shortages and supply bottlenecks.

Food companies can raise prices. Consumers can’t do much about it.

The typical explanation of Covid-19-related inflation goes like this: The pandemic disrupted the flow of the global supply chain. How much it costs companies to make a good or provide a service went up. Other crises piled on; the Russia-Ukraine war, for example, drove up the price of key commodities like oil and wheat. In response to all of this, companies raised prices to offset their higher costs.

Economists agree that supply chain issues are a major driver of the price hikes we’ve been seeing. In the food industry especially, transportation disruptions due to the pandemic and higher grain prices have made a significant impact. But there’s disagreement on whether the higher costs that have resulted from those woes should be passed on to consumers — which is largely what has been happening, according to Becker.

Of course, corporations want to pass on their costs, and consumers would prefer prices didn’t rise. So who should pay? The problem is that there’s a yawning gap in power between these two opposed interests — and the imbalance can grow even wider during an economic shock, such as a pandemic.

This is a sellers’ inflation, explained Wasner. That means the pressure to increase prices comes from companies wanting to raise prices, not from consumers finding it difficult to buy what they want — it’s not inflation primarily caused by too much demand. During normal times, companies are hesitant to raise prices even if there’s higher demand, because if they’re the only one to hike prices, they could lose customers to competitors. During a crisis, it’s a different story, because there’s an implicit understanding that every company is going to raise prices. It’s a tacit agreement, a subtle wink and nod of understanding.

It can go beyond that, Wasner said. They can not only raise prices to offset costs but to gain profit margin. “If you’re purchasing meat at the grocery store, you don’t actually know how much the cost increase is for a slab of meat,” he said. “You just see your price go up and you say, ‘Okay, well, there are these things going on in the economy. I understand that’s just the way it is.’”

“Many food companies have basically taken advantage of the precarity of this moment,” said Ahmed, of Oxfam. “They’ve exploited but also exacerbated inflation.”

Transcripts of corporations’ recent earnings calls illuminate that they’re well aware of their power right now. Groundwork has been collecting highlights from corporate earnings calls on its website. “They’re saying a lot about cost increases and supply shocks, but they’re also saying it doesn’t matter,” said Becker. “We do have these higher costs that we’re paying, but we have so much pricing power, we’re so capable of passing all these prices on to consumers, that it doesn’t matter.”

In November 2021, Kroger’s chief financial officer said that the company was “very comfortable with our ability to pass on the increases that we’ve seen at this point. And we would expect that to continue to be the case.” Tyson Foods’ CEO said in August 2022 that sales had increased 16 percent year-to-date largely thanks to “higher average sales price in chicken and prepared foods.”

Ahmed points to what Jeffrey Meli, global head of research at Barclays bank, told Bloomberg early last year. “The longer inflation lasts and the more widespread it is, the more air cover it gives companies to raise prices,” Meli said.

The power of inflation narratives

This isn’t to say that companies aren’t sensitive to what consumers think about price hikes. In fact, they’re very sensitive and strategic, said Wasner.

But big corporations with brand recognition and customer loyalty can feel safer about charging more. (PepsiCo’s CEO noted recently, for example, that consumers were “willing to pay more for our brands.”) They believe customers will be more willing to pay higher prices if the hikes are seen as legitimate, according to Weber and Wasner’s paper. This legitimization can take place with the help of the media, and “a narrative of broken supply chains and exploding energy prices can develop understanding for rising prices on the part of customers, who would otherwise feel betrayed by the firms.”

That narrative has limits, of course, as my colleague Emily Stewart recently reported. But it has already worked to ease understanding and acceptance of incredible price hikes for essential goods and services. Once companies raise prices, they don’t tend to lower them even if input costs go down.

One way the media could refocus the inflation narrative is to look at the root causes of initial price increases, Wasner said, and “highlighting the profits that are reaped from these upstream industries” such as oil. Their price increases have rippled down all the way to the consumer; how do we prevent that initial price hike from happening in the first place? Waiting for inflation to subside isn’t really a solution. “In the meantime, prices have gone up and there’s essentially been a transfer of income from workers to firms,” said Wasner.

Becker echoed that the current economic orthodoxy on how to fix inflation — to rein in Americans’ ability to spend money by attempting to raise unemployment levels — should be questioned.

“I would say that we have this really toxic narrative out there that the only way we can get inflation under control is to throw a bunch of people out of work,” said Becker. “Larry Summers recently claimed that we would need 10 percent unemployment [for one year], which is about 11 million jobs lost, to get inflation under control.”

“We’re going to try to solve a cost-of-living crisis by making people poor or losing their jobs? I think that’s crazy,” he continued.

What will break the cycle of not just inflation, but of consumers having to pay ever-higher prices for essential goods while the world’s food producers become richer? Experts offered several potential solutions. One is stronger antitrust laws and improved enforcement of preventing and breaking up monopolies. Anti-price gouging laws are another tool in the arsenal. Oxfam, for one, has been a vocal advocate of a windfall profits tax on food corporations. “It’s a tax on those corporations which are raising prices substantially in excess of costs,” Ahmed explained. The fact that it would raise tax revenue is great. But “fundamentally, it reins in companies’ monopoly power and disincentives corporate greed.” Other countries already have similar measures in place. Spain expects to raise about $6.39 billion from its windfall tax on energy companies and banks.

“Corporations are really making profits on the backs of consumers and households,” said Becker. “Let’s tax those windfall profits — and let’s do something with that money.

“There’s nothing that really stops corporations right now from just doing whatever they want.”

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