Are grocers profiteering from inflation?
In a tweet Tuesday, Gail Vaz-Oxlade, a Canadian celebrity money expert, called for a boycott of Loblaws, encouraging followers to “join in sending a message to the Loblaws group that you do NOT appreciate their profiting and calling it ‘inflation.’”
While record profits from oil companies have been called out as profiteering, grocers and food manufacturers, particularly the major meat and poultry providers, have heard similar charges amid rampant food inflation globally. Many are reporting record or at least robust earnings amid pricing actions.
In June, U.S. food inflation was up 10.4 percent year-over-year, the biggest increase since February 1981. Grocery food price inflation rose 12.2 percent.
Alleged price-gouging by grocers recently trended as a topic in Canada after a Toronto Star investigation found Canada’s three largest grocers — Loblaws, Sobeys and Metro — increasing their profit margins, suggesting that price hikes are being passed through at a higher rate than cost increases.
The grocers attributed the margin gains to operational efficiencies, reduced costs and changing shopper habits, such as increased pharmacy sales. However, several economists were quoted as saying they believe grocers’ margins overly benefited from pricing actions.
“What’s often underappreciated is the profit price spiral whereby corporations realize that consumers are willing to pay higher prices, and they increase their prices to not only pass on their own costs, but take a slice on top,” David Macdonald, senior economist at the Canadian Centre for Policy Alternatives, told the Star.
Hal Singer, managing director of Econ One Research and an adjunct professor at the Georgetown University McDonough School of Business, recently told The Hill that earnings calls are one method companies are using to signal and coordinate price increases without overtly violating antitrust laws. He said, “A bout of inflation creates an opportunity that didn’t previously exist for firms in concentrated industries to coordinate better their pricing decisions.”
Inflation and alleged profiteering promise to become a hot-button issue around the November midterm elections. Massachusetts Senator Elizabeth Warren tweeted earlier this year, “Giant corporations are making record profits by increasing prices, and CEOs are saying the quiet part out loud: they’re happy to help drive inflation.”
- ‘Shenanigans’: Calls to boycott Loblaws in August grow over ‘greedflation’ – Global News
- Supermarkets are hiking prices faster than necessary — and profiting from inflation, Star investigation suggests – Toronto Star
- Inflation is providing cover for price fixing: economists – The Hill
- Are big corporate profits to blame for inflation? – Financial Times
- Is inflation really this bad, or are greedy companies profiting off the pandemic? – Fortune
- How Windfall Profits Have Supercharged Food Inflation – Forbes
- I Listened In on Big Business. It’s Profiting From Inflation, and You’re Paying for It. – The New York Times
- Grocery prices are way up. Is Albertsons exploiting them for profit? What an expert says – The News Tribune
- Why corporations are reaping record profits with inflation on the rise – PBS
DISCUSSION QUESTIONS: How would you define profiteering in the current inflationary climate and are certain grocers and food manufacturers guilty? Do you see a potential backlash or a need for better messaging around pricing actions?