Corporate Greed Drives High Food Costs at the Expense of Working Montanans
In the past several years, working Montanans have experienced the financial pressures of high food costs. While the COVID-19 pandemic disrupted supply chains across sectors, including groceries and food generally, that is only part of the story. Large corporations – especially through price gouging and corporate consolidation – also took advantage of supply chain disruptions and high inflation to increase their already enormous profits all at the expense of consumers. The Biden Administration is working to combat the abuses of these large corporations through actions that include requiring transparency from large corporations, providing grants and loans to fight corporate consolidation, and funding projects that cultivate economic opportunity for farmers and rural Americans.
In 2023, grocery prices in Montana rose by 6.5%, the ninth highest increase in grocery prices in the nation. In recent years, individuals and families in Montana and across the country have experienced a steep increase in the price of groceries. Prices generally have gone up since the beginning of the COVID-19 pandemic, but grocery prices have increased faster than the rate of inflation since the beginning of the pandemic. While corporations increased their profits by 75%, consumers are now paying 25% more for groceries than they were before the pandemic, with overall prices having increased by 19% in the last three years. Specifically, since 2020, there has been a 29% rise in the price of cereals and bakery items, and a 27% rise in the price of meat, poultry, fish, and eggs.
Large corporations use many strategies to increase their bottom lines at the expense of the consumers who depend on their products. In 2019, only four top grocery firms made up 30% of sales compared to approximately 15% back in 1990. This is due to corporate consolidation, a practice prominent in the grocery and food manufacturing sector that occurs when a company buys (acquires) or joins (merges) with another company. Consolidation leads to a smaller number of larger companies dominating the sector in which they operate. Less competition in the sector leads to less price competition and, therefore, higher prices, among other negative conditions for workers, working families and consumers generally.
A recent report from Groundwork Collaborative highlights three industries as examples of consolidation and corporate profiteering: meat processing, beverages, and snacks.
Meat processing: A highly concentrated industry, just four companies control between 55% and 85% of the market for beef, poultry, and pork processing. In 2021 and 2022, wholesale prices (the amount a retailer pays to a manufacturer or distributor for a good) in the industry grew faster than input prices (the cost of the resources that are used to create a good). Meatpacking giant Tyson Foods reached record profits.
Beverages: Experts have found that top beverage companies have hiked prices beyond the rise of their production costs in order to increase profit margins – again, at the expense of the consumer. Specifically, PepsiCo (parent company of Tropicana and Gatorade) and Coca-Cola (parent company of Minute Maid and Simply) together control almost 30% of the juice industry. These companies both expanded their profits in the third quarter of 2023 by increasing their prices by approximately 10%.
Snacks: Large snack food companies tell a similar story, with Hershey (which makes Dot’s Pretzels, Skinny Pop, and Pirate’s Booty), PepsiCo (which is the parent company of Frito Lay), and Mondelez International (which makes Oreos, Wheat Thins and Ritz Crackers) all increased profits as they hiked prices. The Chief Financial Officer of Hershey even said toward the end of 2023 that “pricing and productivity gains more than offset inflation and higher manufacturing and overhead costs.”
While the COVID-19 pandemic created disruptions in the supply chain, and then high inflation rates further increased prices, greedy corporations took advantage of the situation to help themselves and hurt consumers. The Federal Trade Commission (FTC) found that large grocery companies exploited disruptions in the supply chain during the COVID-19 pandemic to raise prices at the expense of consumers and to the benefit of the corporations’ own bottom lines. The FTC found that, even more recently, in the first three quarters of 2023, the profits of grocery retailers rose more than they had even in 2021 and that revenue reached 7% over total costs. This finding refutes the claims of large corporations that retailers’ increasing costs are to blame for rising grocery store prices.
The Biden Administration has taken action to address the root causes of the recent increases in grocery prices. These actions include, but are not limited to:
Partnering with a bipartisan group of state Attorneys General to identify and address anticompetitive practices, take action against price gouging and suing agricultural corporations that engage in price-fixing.
Providing $1.2 billion in grants and loans to fight corporate consolidation and outsized pricing power in the meat and poultry supply chains that hurts farmers, ranchers, and working families.
Requiring transparency from the large corporations that have forced chicken farmers into debt.
Providing almost $200 million to 185 projects that promote economic opportunity for farmers and rural Americans.
Calling out price gouging on household goods and urging large corporations to lower prices.
The greed of large corporations has led to consolidation, price gouging, and the price hikes that working Montanans feel every day at the grocery store and around the kitchen table. The Biden Administration is acting to address the causes of these high costs in order to bring them down, and more action is on the horizon. Nevertheless, this remains a precarious time as working Montanans face corporate greed at the grocery store.
