Grocers Under Fire For High Food Prices

Groundwork Collaborative has released a new report, “What’s Driving the Rise in Grocery Prices – and What the Government Can Do About It,” that claims to identify the underlying causes of recent grocery price inflation, including corporate profiteering, supply chain shocks and climate change.

Groundwork Collaborative is a nonprofit think tank and progressive advocacy group described as being committed to advancing an economic vision for strong, broadly shared prosperity and true opportunity for all. 

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“Surveys show that grocery prices remain a top concern for American families, even as price increases have slowed in the last year,” said Bharat Ramamurti, former deputy director of the National Economic Council and co-author of the report. “While the Biden administration has already taken important steps to offset the financial impact of grocery price increases on millions of lower-income families, more work remains to be done to reduce the chances of future grocery price spikes. ”

“Corporations continue to keep grocery prices high as supply chain snarls loosen, prolonging the squeeze American families feel at the checkout line,” said Elizabeth Pancotti, strategic advisor for Washington, D.C.-based Groundwork and a co-author of the report. “As long as these companies can use the next crisis as an excuse to hike prices, food affordability will remain a top concern.”

President Biden is also pressuring large grocery chains to slash food prices for American consumers, as reported by The New York Times, accusing the stores of reaping excess profits and scamming shoppers.

“There are still too many corporations in America ripping people off: price gouging, junk fees, greedflation, shrinkflation,” Biden said last week. According to aides, those comments are a preview of more pressure to come against grocery chains and other companies that are maintaining higher-than-usual profit margins after a period of rapid price growth.

According to Groundwork Collaborative’s report:

• Grocery price increases have outpaced overall inflation. Families are now paying 25% more for groceries than they were prior to the pandemic, compared with 19% overall inflation.
• Higher grocery prices are hitting low-income families harder. In 2022, consumers in the bottom quintile of the income spectrum spent 25% of their income on groceries, while those in the highest quintile spent just under 3.5%.
• 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.
• Certain manufacturing and retail corporations have taken advantage of the recent global inflation surge to raise their profit margins at the expense of consumers. Corporate profiteering was most notable in more concentrated industries, including meat processing, snacks and beverages.
• Climate change has played a significant role in reducing the supply of meat, fresh fruit and vegetables, while the war in Ukraine has driven up prices for commodities like wheat and oil.

Leslie G. Sarasin, president and CEO of Arlington, Va.-based FMI – the Food Industry Association, issued the following statement in response to Groundwork Collaborative’s report:

“Politicizing grocery prices for political gain is completely counterproductive to improving the accessibility and quality of food for all Americans.  

“With the exception of a few notable outliers, such as a period of volatile energy spikes from 2007-8 and the current post-COVID inflationary period, increases in average grocery prices have held steady between 1% and 4% since 2003. This is due, in part, to the fierce competition in food retail, which operates on a slim 2.3% net profit margin. 

“There are a variety of external factors that impact costs at various stages of the supply chain that are beyond the control of food retailers, such as energy, labor and transportation. After a period of great volatility, we are now starting to see changes in some of these factors flow through to food pricing in 2024. The U.S. Department of Agriculture’s (USDA) own data predicts that food inflation will continue to slow in 2024, decreasing  by a projected 0.4%, while restaurant food prices are anticipated to increase 4.7%.” 

“We welcome and encourage a national discussion about food prices and our food supply chain, but such a discussion must be informed by data rather than politics,” concluded Sarasin.

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Meanwhile, the Groundwork Collaborative report offers its own policy recommendations to reduce the risk of future grocery price spikes, including:

• Scrutinize anticompetitive mergers throughout the food industry, from meatpackers to fertilizer companies to retailers, such as the pending Albertsons-Kroger merger;
• Investigate and reform “slotting fees” used by grocery retailers that require product manufacturers to “pay to stay” on shelves, which can stifle competition, enhance retailer power and keep lower-priced competitors off shelves;
• Finalize regulations to improve fairness, competition and resiliency in meat and poultry supply chains; and
• Reinstate and make permanent pandemic-era food assistance expansions that reduced poverty by 10%.