ECONOMY & WORK
MONEY 101
NEWS
PERSONAL FINANCE
NET WORTH
About Us Contact Us Privacy Policy Terms of Use DMCA Opt-out of personalized ads
© Copyright 2023 Market Realist. Market Realist is a registered trademark. All Rights Reserved. People may receive compensation for some links to products and services on this website. Offers may be subject to change without notice.
MARKETREALIST.COM / ECONOMY & WORK

Here's how Grocery Chains Have Been Profiting While Consumers Struggle With Food Prices

According to the report, major grocery chains raised prices and boosted profits despite consumer struggles with rising food costs.
PUBLISHED MAR 30, 2024
Cover Image Source; Boxes of cereal are displayed on a shelf at Target | Getty Images | Photo by Justin Sullivan
Cover Image Source; Boxes of cereal are displayed on a shelf at Target | Getty Images | Photo by Justin Sullivan

The COVID-19 pandemic brought about challenges that both consumers and retailers tackle, but the Federal Trade Commission (FTC) has raised concerns over the conduct of major supermarket chains in the United States during that time. According to a recent report by the FTC, the nation's largest grocery store chains significantly increased prices and boosted profits, even as consumers grappled with soaring food costs and supply chain disruptions.

Image Source: A worker walks through the aisles in a Walmart Supercenter|Photo by Joe Raedle | Getty Images
Image Source: A worker walks through the aisles in Walmart | Photo by Joe Raedle | Getty Images

The FTC's findings reveal a troubling trend wherein supermarkets capitalized on the pandemic-induced supply chain challenges to prioritize profit margins over consumer welfare. Despite facing heightened costs and logistic strains, major grocery chains saw a surge in profits, raising questions about their ethical responsibilities during times of crisis.

"As the pandemic illustrated, a major shock to the supply chain can have cascading effects on consumers, including the prices they pay for groceries,' explained FTC Chair Lina M. Khan.

The report also highlights how dominant supermarket firms leveraged rising costs as an opportunity to further hike prices, ultimately benefiting their bottom line at the expense of consumers and smaller competitors.

Getty Images | Justin Sullivan
Image Source: Getty Images | Photo by Justin Sullivan

Key findings from the FTC report indicate a substantial increase in profits for major grocery chains, with revenues surpassing total costs by more than 6% in 2021. This profitability surge occurred amidst a backdrop of escalating food prices, with the consumer price index reflecting a 7.4% increase in food purchased for in-home consumption in 2021, followed by an 11% jump in 2022.

Over the period from January 2021 to the end of 2022, food prices soared by a staggering 19.4%.

The report singles out prominent players in the grocery industry, including Kroger, Walmart, and Amazon, along with large wholesalers, for their notable profit gains. "Some firms seem to have used rising costs as an opportunity to further hike prices to increase their profits, and profits remain elevated even as supply chain pressures have eased," the report says.

"Larger retailers and wholesalers with considerable leverage over their suppliers were able to take more aggressive action to protect themselves than were their smaller rivals."

 A worker collects shopping carts from the parking lot of a Walmart store on May 18, 2023 in Chicago, Illinois. Walmart, the world's largest retailer, today reported first-quarter same-store sales growth that beat expectations and the company raised its full-year forecast.|Getty Images|Photo by Scott Olson
Image Source: A worker collects shopping carts from a parking lot | Getty Images | Photo by Scott Olson

Conversely, smaller chains and independent stores faced significant challenges in stocking shelves amid supply chain shortages, exacerbating disparities within the grocery sector.

The National Grocer Association, representing independent grocery stores, has called for legislative action to address the imbalance between independent retailers and corporate giants.

"The report supports the National Grocers Association’s longstanding assertion that consolidation and buyer power in the grocery sector lead to discriminatory practices against independent grocers, resulting in elevated prices and diminished choices for consumers," said Chris Jones, Chief Government Relations Officer and Counsel at NGA.

Person holding a white Amazon gift card featuring the Amazon logo in San Ramon, California, USA, November 8, 2020.|Getty Images|Photo by Smith Collection/Gado
Image Source: A person holding a white Amazon gift card | Getty Images | Photo by Smith Collection/Gado

The release of the FTC report coincides with the federal government's scrutiny of a proposed merger between Kroger and Albertson's, two major supermarket chains. While the retail giants argue that the merger would enhance operational efficiency and benefit consumers through cost savings, the FTC warns against diminished competition leading to higher prices.

"Congressional intervention is essential to cultivate a fairer marketplace and address discriminatory practices that undermine consumer choice and competition," stated Jones.

MORE ON MARKET REALIST
The sharks did not expect the product to taste as good as it did, considering what it was made from.
4 hours ago
The designer was also commissioned by top brands and worked for the royal family.
5 hours ago
The host had a look of bewilderment on his face which was absolutely hilarious.
6 hours ago
Things did not seem to be going well for the entrepreneur due to her high energy.
9 hours ago
The guest might have had high expectations, but they were quickly brought down to earth.
10 hours ago
The contestant was unable to contain her excitement and hugged the model.
1 day ago
Two of the players got it right, and while the player who lost didn't mind, fans were not satisfied.
1 day ago
Lisa celebrated her birthday in style with a perfect two-card guess to win the big prize.
1 day ago
Rick Harrison did what he could to console the guest who said that he had lost faith in NASCAR.
1 day ago
Both the guest and the expert were fascinated by how well the automaton worked.
2 days ago
One of the entrepreneurs broke down in tears, explaining all the struggles they had to go through.
2 days ago
She couldn’t believe it when her doll was appraised at a five-figure sum, and laughed in disbelief.
2 days ago
Ken Jennings truly has embraced "Jeopardy!" in every way possible at this point.
2 days ago
The comedian was impressed by the simplicity of the product and amused by the pitch.
3 days ago
Harrison usually makes smart deals on the show, but this vintage car buy turned into a costly mistake.
3 days ago
Had she started the game in a better way, she might have won the five-figure prize money.
3 days ago
Barbara Corcoran made the exact same offer, and she wasn't happy about being rejected.
4 days ago
The guest believed that it was worth a modest amount of money, but that was clearly not the case.
4 days ago
With James Holzhauer in the lead, Amy Schneider and Andrew He decided to joke around.
4 days ago
Barbara Corcoran told the founders that she had never seen Greiner so passionate.
4 days ago