Yves here. There’s been some debate on the “greedflation” thesis, that companies are increasing prices because they can, as opposed because they need to. The food industry offers some support for this claim.
By Jessica Corbett. Originally published at Common Dreams
As the U.S. government on Wednesday released its latest inflation report, the watchdog Accountable.US put out a new analysis detailing how Americans face food insecurity while major food corporations are padding their profits with price hikes.
“Big Food’s staggering increase in earnings shows they did not need to raise prices so high on consumers but did so anyway to maximize record profits,” said Liz Zelnick, director of Economic Security and Corporate Power at Accountable.US, in a statement.
“It’s shameful that Americans are left food insecure and have to skip meals while corporations and their wealthy shareholders enjoy the spoils of supersized profits under unjustified price hikes,” she added. “It’s clear that the food industry will not hold itself accountable. It’s time Congress do more to rein in corporate greed, one of the main factors currently driving up costs for families.”
“It’s time Congress do more to rein in corporate greed, one of the main factors currently driving up costs for families.”
The Accountable.US report takes aim at General Mills, Kraft Heinz, and Mondelez—three of the top “at home” food companies in the United States based on market capitalization—focusing on January through March, the first quarter of this calendar year.
General Mills is one of a few companies that dominate the U.S. breakfast cereal market, with brands including Cocoa Puffs, Cookie Crisp, and Lucky Charms. Kraft Heinz is known for not only ketchup and macaroni and cheese but also Jell-O, Kool-Aid, and Philadelphia Cream Cheese. Mondelez’s top brands include Chips Ahoy! and belVita.
The companies’ combined net earnings for the quarter rose by 51% year-over-year (YoY) to a combined $3.47 billion, and the trio collectively spent over $1.3 billion on shareholder dividends, Accountable.US found. Of the three, only General Mills saw its earnings drop from the first three months of 2022 to the same period in 2023—though the company still spent more on dividends this year compared with last year.
The first three months of this calendar year were the third quarter of General Mills’ 2023 fiscal year. Accountable.US cited Reuters‘ March 23 report that the company “raised its fiscal 2023 forecasts for a fourth time after beating estimates for quarterly results, helped by price increases and steady demand for its packaged-food products.”
The watchdog also highlighted that General Mills “saw its net earnings increase by nearly $2 billion YoY for the first nine months of FY 2023, as the company spent over $2.16 billion on its shareholders through a combination of dividends and stock buybacks.”
For Kraft Heinz, the watchdog referenced Reutersreporting earlier this month that it “raised its full-year profit forecast on Wednesday on the back of higher prices and sustained demand for its packaged food items.” The analysis adds that the company “saw its Q1 2023 net income increase by 7.1% YoY to $837 million and spent $491 million on shareholder dividends.”
Accountable.US noted that during the first quarter of this year, “Mondelez—which touted price hikes for its double-digit increases in revenue and earnings—returned $928 million to shareholders through a combination of dividends and stock buybacks, after reporting $2.1 billion in profits, a 143% increase from last year.”
NEW: As inflation continues to remain stubbornly high, @accountable_us highlights that large food companies continue to hike prices in order to pad profits and reward shareholders. https://t.co/omJ5d2zM94
— Ryan Summers (@RyanTSummers) May 10, 2023
As the #Fed mulls even more rate hikes, #Powell needs to finally recognize rate hikes will do NOTHING to address the MAIN driver of inflation: corporate greed. Rate hikes will only put more banks on the brink of collapse and risk massive unemployment. https://t.co/y2JIqScCUM
— Ryan Summers (@RyanTSummers) May 10, 2023
The group used its new analysis to call out the Federal Reserve, saying that “the findings are the most recent evidence that while inflation is slowing, the Fed’s single-minded policy of repeated interest rate hikes [is] doing little to contain the primary driver of rising costs—corporate greed.”
The report also emphasizes recent admissions from economists that corporate greed is driving inflation—which progressive organizations and experts have been stressing for months in response to the Fed’s interest rate hikes.
As the analysis points out, The Wall Street Journalreported earlier this month:
Consumers have… been unusually willing to accept higher prices lately. Paul Donovan, chief economist at UBS Global Wealth Management, said businesses are betting that consumers will go along because they know about supply bottlenecks and higher energy prices.
“They are confident that they can convince consumers that it isn’t their fault, and it won’t damage their brand,” Mr. Donovan said.
According to the consumer price index report released Wednesday by the U.S. Bureau of Labor Statistics, “the food at home index fell 0.2%” from March to April. While cereals and bakery products saw a slight increase, there were decreases for milk; nonalcoholic beverages; fruits and vegetables; and meats, poultry, fish, and eggs.
However, the bureau’s report also provides context from the past year: “The food at home index rose 7.1% over the last 12 months. The index for cereals and bakery products rose 12.4% over the 12 months ending in April. The remaining major grocery store food groups posted increases ranging from 2.0% (fruits and vegetables) to 10.4% (other food at home).”
The Accountable.US analysis notes that in January and February, “food-equity advocates warned that ‘food insecurity for millions of American consumers is worsening’ despite overall inflation easing, with higher numbers of food stamp recipients reporting ‘skipping meals, eating less, and going to food banks to manage costs.'”
The U.S. Census Bureau has estimated throughout 2023 that based on household surveys, roughly 25 million people sometimes or often did not have enough to eat in the previous seven days. The U.S. Department of Agriculture reports that nearly 34 million people live in food-insecure households—though research published last month suggests that figure is likely an undercount.
Additionally, food insecurity figures don’t provide a full picture of how many families struggle to stay fed, as Claire Babineaux-Fontenot, CEO of food bank network Feeding America, explained to CNN in March: “The nuance is that some people are not ‘food insecure’ because they get access to the charitable food system. That doesn’t mean they’re able to achieve self-sufficiency.”
U.S. households are also contending with losing assistance related to the Covid-19 pandemic—including the end of the expanded child tax credit, universal free school meals, and increased Supplemental Nutrition Assistance Program (SNAP) benefits, formerly known as food stamps.
As Common Dreamsreported in late February, while experts warned that the end to boosted SNAP benefits would cause a rise in U.S. poverty, Public Citizen president Robert Weissman declared that “a decent society would not let this happen.”
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> . . . Cocoa Puffs, Cookie Crisp, and Lucky Charms. Kraft Heinz is known for not only ketchup and macaroni and cheese but also Jell-O, Kool-Aid, and Philadelphia Cream Cheese. Mondelez’s top brands include Chips Ahoy! and belVita.
The price of that crap should be quadrupled from here to discourage it’s use.or include a vial of insulin with every package.
Far be it from me to disagree. This stuff has way too much sugar in it.
> . . . Cocoa Puffs, Cookie Crisp, and Lucky Charms…
I see those and I want to gag. I eat all bulk organic. Nothing with labels, well, except for what it is simply put.
It’s a food chain, from farm to table there’s a lot of middlemen, each demanding profit. Can greed be laid solely on the biggest food conglomerates? Everyone in the chain wants their cut… and yes, because they can.
It’s isn’t just supply that needs to change, it’s also demand and our relationship to supply.
Manufactured processed foods could use a good leaving alone for so many reasons. They have calories but little real nutrition. Why are we still buying them? Because (ironically) still cheap and convenient and the alternative is to do for ourselves. It isn’t that we don’t have the time; it’s that we don’t want to make the time. Why… aren’t we worth it?
Junk food and sugar addiction is a separate issue. There is a reason that US food is loaded with sugar. It’s highly addictive and causes people to eat more, good for profits. It also leads to diabetes, obesity etc which is good as US denizens pay orders of magnitude more for insulin and other medications than other countries. They get extorted for insulin and medication. It’s a great business model.
The price of staple foods, if you haven’t noticed, has skyrocketed. Bread, chicken, milk, eggs, fruit and veg etc. Forget the junk food
Keep in mind that white flour, potatos and similar is basically sugar (starch) as well.
Thus white bread is effectively sugar in a different form.
And my pet thinking is that in nature you rarely find raw “sugar”. Instead it will be tied up with indigestible fibers in some ratio or other. And the fibers are what regulates the sugar intake, as its accumulation in the stomach puts an upper limit on ingestion.
Note BTW that type two diabetes etc not a new problem. But it was historically considered a rich man’s disease. Why you see all those bishops and such being represented as fat pigs, because their position and wealth afforded them the them luxury of eating white bread etc at every meal.
True, I love taters and bread (probably from peasant ancestry). People should eat more fiber for sure. Historically, poor folks eat a ot of these foods because meat and other proteins are more expensive.
“It isn’t that we don’t have the time; it’s that we don’t want to make the time. Why… aren’t we worth it?”
Easy for us to say. Talk to the poor young mothers working multiple minimum wage jobs to support their kids.
We have the luxury of choices, many have much fewer.
There are always the ‘what about’ arguments, please don’t make them here. Poverty isn’t a choice… who would chose it? But food is and if we don’t have the power to change these very models of successful capitalism at work, we can still change demand by doing for ourselves more. There’s not a lot of consumers manufacturing junk food out of their kitchens nor are we buying most of the sugar. That’s used in the goods we buy and bring into our homes… as you’ve pointed out. That’s is a choice.
Are we all still agreed on what a ‘staple food’ is? I mean separate from what the market tells us those foods are, as though to suggest we must have them and should eat them every day?
I stopped buying bread a couple of years ago, couldn’t seem to digest it anymore without pain, starting with the continuous heartburn. It felt like the sandwich I was eating had grown tiny claws and was resisting the journey to my stomach. I resolved the problem but didn’t go back to buying bread. There are independent local bakeries for those who can and who have access. We don’t have to buy from Krogers.
Likewise chicken, it’s become a disturbing bird for me to handle and eat. Nevermind how chickens are raised, I can see and smell that something is wrong in the time I’m preparing it for eating, so I buy it very rarely now.
But I have noticed the prices of the rest of your list. Milk because I make my own yogurt, to keep my digestive tract on an even microbial keel. Eggs purchased from the farmer’s market 6 months out of the year when hens are laying. Vegetables make up an increasingly large part of our diets here. The fruit seems to be going to feed the Western Tanagers flying through on their way to the Northern Rockies. Small colorful birds get lion’s share of blueberries in our backyard.
There was another addiction that set in and took hold of the American food consumer long before we fully appreciated the consequences of sugar, and that’s convenience. Our mothers were absolutely tickled to be relieved of the ‘drudgery’ of cooking. They were told they were enslaved to their kitchens and now their supermarket would increasingly help them break their chains so they were “free” to have a career outside the home. Win-win? Well, sorta.
Did you happen to read Kate Wagner’s piece in the latest Baffler? Would the McMansions be as ubiquitous were it not for the double incomes? Moms (and dads) made trade-offs for those McMansions they’ll be indebted to for most of their working lives. One of those trade-offs was cooking and nutrition. Lose-lose. I still thing they can ‘have at all’ but someone is going to have to bite the bullet and spend more time in the kitchen again…. and that’s all I have to say about that… for now.
Whichever partner would be making less money in the market job-place could be the partner to spend more time in the kitchen, where he or she could make more un-money ( prevent and pre-empt more spending on ultra processed and ultra convenience foods by doing more of the processing and conveniencing right there on site, in the kitchen/pantry/yard.
Hopefully the partner making the more money would respect the work of the partner making the more un-money.
Those of us who read and sometimes comment here are educated and informed or at least informable enough to know what ” food choices” is even if we may be poor and stressed enough to have hard limits on whatever choices we can actually make. Even those of us here living within those hard limits know enough or can know enough to be able to choose among the few choices within reach.
A lot of America’s Poors don’t read NaCap and maybe not any other website either. Their own near-zero-information levels and food shop skills levels combine with the Food Deserts and Food Junkyards they live in to render them choiceless. If anyone tried to bring them enough food shop information and skills to where they could recognize a choice in those rare situations where such a choice existed, would they receive such information-donation efforts constructively or would they presume such efforts were based on Lady Bountiful Patronization and would they thereby reject any such efforts? I don’t know.
But those of us here who like to believe that we know what ” choice” even “is” might well read Mark Ames’s classic little article called Elite Versus Elitny. Here is the link to its re-issue on ” the eXiled”. ( The original issuing had some good photos to go with the words and this one doesn’t. But it still has all the words.)
https://exiledonline.com/elite-versus-elitny/
Ames suggests we give up on trying to help the hostile embittered masses who reject the snobbery they think they see in anyone who thinks they can teach those masses something.
We should focus on living better our own selves in plain sight and open view, within the limits of our own limiting situations. In food terms, that would mean partially defecting from the Main Stream Food System and moving our food efforts over to various marginal edges and corners of Food System D. And most of the people capable of reading this site and these comments are capable of taking a few steps in that direction.
So if the fathers are absent and cannot pay child support would it make sense for there to be a government takeover of child support. And it could be focused on particular minority groups that we want to favor. And the foods mentioned in the article are clearly unnecessary and largely bad to eat like Chips Ahoy…..which I like but whick I avoid like the plague. Even Ketchup is terrible…..mostly high fructose corn syrup. And people could cook at home although I grant a single mother with two fast food jobs, no child support and four kids between 5 and 10 is not going to have time to do it……
>It isn’t that we don’t have the time; it’s that we don’t want to make the time.
I don’t think that’s true for a single mom working 2 jobs to keep food on the table and a roof over her and her kids heads. Making the time just may be too hard.
I have also noticed that a lot of people I know – especially younger people – have no idea how to cook. They’ve eaten pre-prepared or quick to prepare meals their entire lives and never learned cooking from whole, raw ingredients.
It’s interesting that lots of people don’t know how to cook, or consider microwaving as “cooking.” I’m old enough to remember when in high school boys took “shop” and girls took “home ec” and then home ec became a dirty word, and all of it stopped. We need to bring back learning to cook in school, for everyone.
from the late Mr. Bourdain:
“Basic cooking skills are a virtue… the ability to feed yourself and a few others with proficiency should be taught to every young man and woman as a fundamental skill. [It’s] as vital to growing up as learning to wipe one’s own ass, cross the street by oneself, or be trusted with money.”
To make ” home ec ” not dirty or disrespectable, we could rename it as ” kitchen shop” or “food shop” or something.
Then we could teach all the young people something about “metal shop”, ” wood shop” , ” food shop” , ” art shop”, “music shop” etc. Or at least metal shop, wood shop, food shop.
What per cent of all the “money” logged and counted at each step of the food chain from farm to final consumer stays at the farmer level? Are there actual figures on that?
And of that whatever per cent that “stays” at the farmer level, how much of it even really stays there? As against how much of it goes right back out again from the farm to the farm’s creditors and the farm’s input suppliers? Are there actual figures on that?
I suspect that “we” who regularly read this blog could very well grind our time-allocation around to be able to cook from scratch with some of that re-allocated time. How many poors and near-poors have the time to be able to re-allocate and the energy to be able to cook with in that re-allocated time if they even have any re-allocatable time?
And yet the non-poison goodfood the poors and near-poors currently don’t or can’t make for themselves is the non-poison goodfood they will never have. Perhaps some social uplifter groups like maybe Democratic Socialists of America or other such can try doing outreach and downreach into the poor and near-poor communities to do something about that. ( The Black Panther Party acted on its understanding of goodfood as a human civil rights issue with things like their ” free breakfast program” for poor Black children).
“Consumers have… been unusually willing to accept higher prices lately. Paul Donovan, chief economist at UBS Global Wealth Management, said businesses are betting that consumers will go along because they know about supply bottlenecks and higher energy prices…”
Unusually willing to accept higher prices? WTF? These ivory-tower elitists have no clue. Either you pay the higher prices, or you don’t eat. Gosh, how long can I go without eating? I didn’t realize that humans had the options to forego food and water. Silly me.
BigFood, BigAg, BigPharma, BigOil etc. monopoly rent-seeking, price gouging, or extortion – whatever we want to call it, we don’t have a “free market”. That’s a fairy-tale and ideological BS.
The Mass Media Cartel, Fed Chair and other mouthpieces of oligarchy tell us inflation is caused by workers making too much. Any honest, informed person (or person who works for a living) knows that is complete Marie Antoinette-style BS.
However, since most US denizens are misinformed, bombarded by distractions and freak shows, and mis-educated – many will believe just about anything they see/hear/read from BigMedia. (Ministry of Truth)
In line with this comment, people who think the Fed cares about inflation are mistaken. People who pretend to think the Fed cares about inflation are spreading the Fed’s own disinformation about that.
The Fed knows very well where this inflation comes from and the Fed supports its class comrades and masters making money from this monopoly-pricing-power inflation. What the Fed wants to do is to create a recession big enough to achieve the disemployment it needs to achieve in order to get the wage reduction it wants to see. Any statements to the contrary smell like disinformation and diversion to me.
True, didn’t Powell say explicitly he waned to drive down wages?
I think he did and I think that quote could be found. Driving down wages is the Fed goal.
“Reducing inflation” is the cover and the excuse.
We started back up our garden this year because of the food cost increases to fresh vegetables.
Makes more sense to use our land and grow our own supply because of the astronomical price increases we are seeing at the store.
Our next-door neighbors have even inquired about purchasing some of our excess once our crops start producing.
Might be time to fire back up community gardens to feed your locality – mutual aid is the only way forward, imo
Do you live in “the country”? Or in an ex-urb? Or in a suburb?
Monopoly and oligopoly are the main driver of price increases and profitability. That plus the US publics’ inability to cook porridge or toast a slice of bread. Companies do what they can do. The business schools particulary the MBA factories like Harvard, Princeton, Yale teach that oligopoly is good but monopoly is excellent. Add big business having bought big government and my guess is only Paris 1789 or Russia 1917 will rectify matters. We are already on track with the precursors which were inflation and food shortages. My mother owned and operated a store in Ireland post WW2 she was delighted when inflation broke out and the public expected prices to rise.
Yes, oligopoly is the BIG problem and the author is conflating slightly different issues:
(a) the oligopoly of “brands” and the premium that brands take in—go price Oreos versus generic Oreos;
and (b) the oligopoly of producers, processors, distributors.
It’s the latter that’s the prime problem that no one (especially DC Democrats) cares about.
Did the companies get greedy post covid only?
I think we are all greedy, I would like to sell my products for 1000 times more than what I am getting now but I am afraid no one will buy them. Concentration could be one reason why some companies get away with higher prices and they must be broken up but the real reason I think it is that people have money and pay the prices. Therein must the cause of inflation be, more money, less goods.
I read somewhere (probably here) that 30% of inflation is profits, so hardly surprising.
I have always done a sizable vegetable garden, and even expanded it more this year. Our closest neighbor has started a neighborhood farm and sells some of their produce. There is another fairly good size community farm down the road a half mile. So community farms are becoming more common.
What bothers me most about the story is that Americans accept the claims of corporations and their wealthy owners, even when there is evidence that the owners are lying. Americans almost seem to prefer the self-serving lies to the awful truth that they are being played by the wealthy. People in other countries protest in the streets at such things, but not here in the US. It is safer to stay home and watch TV than to go out and risk the tear gas and rubber bullets. So much for free speech rights.
Perhaps wannabe free-speakers need to find diffuse spread-out venues over which to speak freely and be heard freely, where tear gas and rubber bullets ( and soon the field-mobile raytheon oven-rays and the L-RAD eardrum melters) cannot be easily deployed.
It is harder to tear gas ten thousand little meetings than to tear gas one big rally.
And until the internet has actually been kill-switched, it still exists. And it can be used until it doesn’t exist anymore.
( And by the way, do you live in a suburb? Or in the “country” itself?)
Using a constant to explain a change? Packaged food giants used to be nice guys and suddenly got greedy?
I would speculate that in a lower inflation environment, firms have less opportunity to test their pricing power. But when prices are rapidly rising they have lots of opportunities.
It isn’t like pricing products is a science. You start with estimating cost, and then add margin. And are constrained by markets. Every pricing action is an instance of market discovery.
The least likely explanation is that these same companies used to be nice and suddenly became greedy. Inflation is sticky.
And “inflation” provides very good cover for price-hikers and price-jackers to operate under.
My guess is that food companies originally planned to raise prices as a way to compensate for the inevitable easing of COVID lockdowns, which was bound to result in a meaningful drop in food and beverage sales volumes. Grocery store sales benefitted significantly from COVID lockdowns, which according to WolfStreet was:
“triggered by a mix of panic buying and a shift from consumption to those stores, from restaurants, bars, schools, universities, mall food courts, company cafeterias, and the like. People were still eating and drinking, but they were buying those goodies at the store”
The end of pandemic lockdowns would inevitably reverse these high food and beverage sales volumes, which means lower revenues for food companies. So they probably all got together and decided to collectively raise prices in order to maintain COVID lockdown revenue levels. Price fixing cartels are illegal, but food companies are probably smart enough to achieve this result in ways that do not openly conspire with other industry participants. For example companies routinely use third party software and services to price their goods, including algorithmic pricing or dynamic pricing, which could potentially be manipulated in order to achieve collective price fixing.
The short term result of raising prices is supersized profits for food companies, as the price increases they chose to implement have far outpaced any drop in post pandemic sales volumes. But the long term risk of raising prices in this way is that consumers will get used to buying less, and sales volumes could become irreversibly depressed. And this can cause horrible problems for economic stability as well as consumer demand.
Non-food companies are likely thinking about price increases in a different way. They were looking to regain the sales they lost during COVID lockdowns. Think travel and retail and hospitality and entertainment. These industries participants probably got together in the same way and decided to collectively raise prices in order to regain pre-COVID lockdown revenue levels.
The biggest beneficiary in this group is interestingly luxury good retailers. They have sales volumes which are tiny, and profit margins that are massive, which means huge jumps in revenue when they successfully raise prices. Just ask Bernard Arnault of LVMH Moët Hennessy Louis Vuitton now the richest person in the world.
It would not be possible for large food producers to raise prices to extortionate levels were it not for their monopoly or near-monopoly positions in the marketplace. Capitalism always inclines towards monopoly or oligopoly, which can only prevented by active and aggressive enforcement of anti-trust policies. Such governmental action has long been neutered by pro-business efforts to dismantle the administrative state. The bad guys are winning, as they so often seem to do.
This might be a way to generate support for zealous and even over-zealous anti-trust.
Monopoly is Marxist. Monopoly is the necessary last step on the road to revolution. Constant anti-trust imposes an indefinite delay on inevitable Marxist outcomes.
When it comes to processed foods I tend to buy generic or store brands rather than from the companies mentioned. However those brands have inflated practically as much percentage wise but from a lower base since they don’t have the marketing and advertising overhead. Plus staples like eggs and milk have also gone up greatly
Perhaps it’s true that the name companies are showing high profits because they are the ones who already had the higher profits to inflate. But there must be other factors driving this unless one thinks the whole food system is a cartel.
And that could never happen. Could it?
I’ll pay attention when everybody stops pretending like the Fed doesn’t know what it’s doing.
According to WB commodity prices “pink sheet” the price of wheat and maize is falling in 2023 compared to 2022. Rice is the grain still showing significant inflation.
Possibly the issue is that these companies are fast to rise prices of their processed foods when commodities rise but very reluctant to pass commodity prices downwards to consumers. Sticky prices as usual. In the end the upwards redistribution trend remains unabated, inequality on the rise.