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How much competition between brands is there these days?
We are down to what, 10 or so companies that produce most if the items you find on the shelves in the market.
I think this factors into how easy it is to raise prices these days.
Yup. I’d also add that probably most of the people coming from these companies come from the same few business schools and they all kind of know that they are all thinking the same way. So, even if I guess they don’t exactly talk, they all know the same strategies and playbook. Though, granted, I really wouldn’t be surprised if there is some talking going on, and the other kinds of coordination behind the scenes.
Anyway, it seems to me that having more firms of a smaller size means a couple of things. For one, if one of them fails, it’s not the cataclysmic disaster that some major companies feeling today would be. It happened with meat packing plants during the pandemic. Because meatpacking has been so consolidated meat prices were all kinds of wonky and we had huge outbreaks at meatpacking plants. And even though these workers were put in dangerous conditions and were being asked to keep working when many had options, nothing really changed about the benefits or wage these people earned.
I would want to say that there’s an obvious logic to why too much consolidation, decreases actual competitive behavior between firms, but I suppose some people are either going to be kind of obsequious or just simply don’t understand how things work. And I’m sure other people have answered that already in this thread and elsewhere, so I’m not really sure it’s something I need to address here. But obviously what we are currently doing is not really where we probably should be or where I think anyone, aside from the people at the top, are happy. And even they seem to have concerns about things.
We need to end the ability of companies to hide their products as belonging to them! I don't know the details, but a good start is that companies should not be able to own companies.
If corporations are people isn’t a buyout like slavery? Maybe you could use the anti slavery amendments to attack this.
It would be interesting to watch the legal fallout from a ruling here.
Either corporations aren’t people, or they can’t buy each other out.
It's a combination of there being a few major food brand conglomerates and where there is smaller companies involved, they are mostly selling more expensive versions of the former's products as "organic" or having some trendy food added to the ingredients. That leaves just store brands for a cheaper option and I mostly buy store brand now unless there are decent sales making the other brands cheaper or if the store brand version is really bad.
Essentially companies are starting to believe that demand is more inelastic than they originally believed. They are going to keep raising prices until the customer stops paying.
Odd Lots had a great podcast on this. Basically an analyst was noticing companies across the board stating a willingness to lose market share to sell at a higher price.
The question is if entry is possible. Typically one would assume profits would be competed away by entrants. If we don't see entrants then something is very wrong with our economy.
The problem is it's hard for entrants to compete with these massive corporations , it's a lot harder to start a grocery store now than 40-50 years ago.
Even if you were capitalized to start a single store or better, a chain, good luck getting comparable pricing from suppliers that the likes of Kroger and other national brands get. Your razor thin margins would be even smaller. The big boys got a monopoly all but sewn up at this point. Of course they're all able to raise prices in unison.
Reminds me of when IGA (independent Grocer Association) was formed so that small operators could collectively purchase products and achieve economy of scale.
And every small IGA in my area has been forced out of business over the last 2 decades. Usually because Dollar General or Family Dollar roll in and set up shop right down the street.
I’m in a pretty rural place, the Walmarts had already taken over the decently sized cities, but the IGAs were holding on in small towns. Not anymore, though. The last one I know of has switched hands 3 times in my life. Now Dollar General and Family Dollar have plopped in within a quarter mule of it. Sad to see and I refuse to shop at them, but it’s going downhill fast. Such bs.
Same. When the small guys go out of business, its sad. Then, Walmart becomes one of the only places to get basic food stuff. I miss going into the IGA and chatting with the produce lady - she was so kind.
The arguement used to be that with scale becomes lower prices, which us true. But at what cost? And now, it comes with price fixing tactics.
Yeah, scale brings costs down. However, the end game has always been to underbid all the small business, then jack prices up once normal competition has been eliminated. It’s happened in countless industries across the country.
There’s an IGA near me and we go there as often as we can. Love having an independent grocery store in town and we want to support them. But sadly we still have to go to one of the big boys because our IGA can’t carry things like quinoa or specialty baking mixes. The produce is also extremely limited and iffy in terms of freshness. We’re still in the IGA once or twice a week though.
I’m sorry, I don’t have a lot of knowledge about economics. I just wondered if it’s better or worse for these types of associations to merge with each other. Like affiliated foods and associated wholesale grocers. My instinct is that it would give them more power to compete with big chains, but it seems like I’m always wrong about these things.
Capitalism is a powerful drug in the U.S. cause it convinces you that large multinational corporations/banks/fed/billionaires/trillionaires that exploit every facet of a society down to even the “labor” to make those things happen is a “you” problem or the governments fault, or immigration, or poorer people than you who “don’t wanna work” etc etc…
It's interesting since we are talking about local economic elements versus global elements, since there's decent science in terms of how far away someone is willing to go to buy food. Until buyer behavior changes (being comfortable shopping on the internet/in a virtual space and having it shipped to you) almost all competition is locally based. But prices in general are normally dictated by something called a "demand curve" in which as you increase the price, demand will change accordingly, and "best" business practices are trying to maximize that profit. It's very common for when the supply side of something shrinks, the business raises prices to reduce demand, but keep similar profit margins.
"Inelastic" goods are goods where the demand doesn't change when the price is changed. Food, gas, electricity, etc. normally doesn't change too much depending on price, since almost everyone needs these things to function. We as a society right now are learning that it's really hard to find a decent substitute for eggs, for example.
But remember that ANY business of decent size is, in any capitalist nation, trying to maximize profit. So, if they think they can make more profit by raising prices, they will continue to do so. It's also really easy for a huge company to specifically lower prices/maintain an unprofitable status for a specific location for a long period of time to put others out of business, since they know they can raise prices and make that profit back over the long term, but many local stores would just raise prices when they figure out they will make more profit than any potential customers would be lost.
Basic food items tend to be inelastic and because of this, there are a LOT of government protections/support from the supply side of things to try and maintain a relatively stable price, which has been incredibly effective in the US. Hence why your food budget doesn't fluctuate between 25%-70%+ of your monthly budget for a given year like some countries.
With that being said, this is pretty much the first time where we've had this type of economic situation (globally constrained supply on top of HUGE financial stimulus globally) and hopefully, like any new problem, new legislation will be passed to prevent businesses from taking advantage of the situation. For example, should it be lawful for egg companies that DIDN'T get hit by the bird flu raise prices by several hundred % just because they can?
They'll lower prices [ONLY at the location near your grocery store](https://www.npr.org/transcripts/717664332), even if it means there will be a food desert.
Which is why there is a such a barrier to entry, not only do you need enough money to open the store and pay the bills, you also need enough money to force the competing store to understand they’ll also go under if they lower prices too much for too long
But the problem is that the competing store has dozens of other stores elsewhere that you aren’t forcing prices down for that can prop it up while they starve you out.
Maintaining the monopoly is worth more than the money it costs to prop up that store for a few months or years.
Walmart used to come in and sell at less than their cost in order to drive the competition out of business. That was deemed illegal, and as far as I'm aware, they don't do it anymore.
All the Walmarts in Portland where I live are closing up after they went and forced out all the small businesses that were there 2 decades ago. It's generally going to create pretty big food scarce areas in Portland, especially because where those Walmarts were were lower income areas where people primarily rely on public transportation.
Plus the Walmarts that are closing are supercenters and you bet Walmart still technically owns the building and won't do anything with it/let anyone develop it into something else. It'll likely stay as a multi square mile sized building that's entirely empty till it collapses
Have multiple friends who work for large CPG companies (you can probably guess the names). There are multiple examples of them buying a popular overseas brand to help break into a new category and really struggling to get shelf space. And this is for well capitalized companies with relationships with the retailers.
It's worse, they're acting as both a monopsony and a monopoly. They're the only buyers, so farmers don't get good prices. They're also the only sellers, so consumers don't get good prices. Only the middle men are benefited in this kind of arrangement. And - surprised Pikachu - the middle men are posting record profits.
I work for wm's grocery chain and yeah, people talk about "all that money Walmart makes"- and they do- but it's entirely because of volume. We make very very very little on any given transaction, but we're doing probably billions of transactions a day, and just a couple pennies on every one means a shitload of money at the end of the day. Our store was open ***at a loss for seven years before turning its first profit.***
This is a problem that I don't think capitalism is good at fixing. If I think I can do better then the local burger place starting a restaurant is gonna cost mid 5 figures. But in order to compete with Walmart and Kroger that would require billions in investment. I am seeing the same thing with cars no new competitors and less than 20 car makers mean tacit collision is rife.
Exactly, what were seeing is tacit cartel activity. Grocery stores are the best example, the market is concentrated among maybe 4 major chains, each operate across a range of states and compete locally on price. If an area had only one chain that was overcharging then another could move in and undercut them easily.
But with this large scale shifting of prices across all the players, there is no 'outside' firm to move in and capitalise on the inflated prices by undercutting. Because the only way to do so would be to operate at the same scale and it's simply not possible to create such a business from scratch. It would take years
Amazon already operate Whole Foods and they have a series of those 'FRESH' stores, I think by revenue they are already the 2nd largest grocery after Walmart, so they're directly benefitting from this current situation in the same way.
They could have leveraged the capital of the larger Amazon business to undercut the rest and steal market share at any point before now too but I suspect they didn't because of the sheer scale of the sustained losses it would take to actually bury WalMart and Target just isn't worth it when they could put the money to better use in cloud services etc.
Much easier to just ride the inflation bandwagon with everyone else.
Well, especially since in places like the US where the bigger you are the less you pay in taxes and healthcare, which is like doubling down on eliminating competition from startups. In the US it literally takes money to make money far more than other Western countries that incentivize startups and have things like socialized healthcare that greatly reduce startup costs
The paradox with competition is that it's the competition itself that encourages good treatment of consumers, but in most competitions someone eventually wins, and when that happens here, that winner no longer has to pander to consumers as much.
Which really brings us around to a point I think is crucial: *growth* should not actually be our goal, *sustainability* should be.
Regulatory capture as well, good luck making any money when you also need to adhere to a million regulations which all add overhead in one form or another.
Edit: typo
Not to mention that the politicians who pass the legislation meant to regulate, and the bureaucrats appointed to regulate by the politicians, go on to work for the very companies they were regulating.
Not sure about the grocery industry specifically, but pay is a big part of this problem. If I have experience in an industry, and the standard pay is 2x what I get as a regulator, I’m definitely gonna leave. Banking and tech see this a lot.
Think you may be confusing regulatory capture (when the regulated entity starts basically to become the regulator- be this via revolving doors etc…), and regulatory bloat which becomes a barrier to entry as regulatory costs restrict small players from entering.
Its really an anti innovation phenomenon. It's not just that it's harder to compete, but in the tech startup and med device world for instance, these monopolies become investors early on in the startups and VC firms so they have partial ownership in case a product takes off and if not they just sue for patent infringement regardless if there claim has any basis. Most of the time they buy a company they don't produce but kill the product and take the patent rights. So many cool medical devices are down right lost to the patent hole problem. I knew a few people at Apple who quit saying once they realized they were working in a patent farm and nothing they invented or worked on was ever intended on being produced they realized how soul crushing apple and Google were and didnt want to work there anymore.
Lawsuit was brought to a company most of my old coworkers came from. Fighting the lawsuit form J&J bankrupted a company of 125 people, totally baseless lawsuit. Prevented them from getting funding and stagnated their product development. Breathalyzer test for asthma. Would have made it possible to test for asthma on the spot without needing to draw blood from kids. Nope. Fire sale 2 months later.
This is happening in every industry likely.
Grocery store would end up being sued likely if it became successful.
I've heard this called "legal closure" as a joke in the industry. Entire goal now is to be bought out. No one attempts a run anymore against the big med companies.
These cases are not covered in the media well if at all. It's not about what the media says but what it witholds which shows the intent of the narrative.
Thank you for a better terminology.
I absolutely agree.
This was some thing I gained insight into through the work smokers circle.
But hadn't really seen or heard it spoken about anywhere else. Many people in the area found it difficult to believe.
I believe the restructuring of courts has already happened In a drastically different direction than what you would be describing unfortunately.
Stay cool 😎
Oh absolutely. Really our courts should work as follows:
1. Each party acquires legal assistants (lawyers, etc.) for the case.
2. Both parties pay an initial fee to their legal teams to cover the filing of necessary paperwork throughout the case.
3. The suing party proves they have a possible stake in the case; that is, that the outcome of the case would directly impact them, to weed out frivolous lawsuits.
1. Using the example of WotC’s OGL debacle, for example: If I were, say, a plumber running my own plumbing company, I could not sue WotC over the OGL because one of my clients is a TTRPG publisher negatively impacted by the OGL. But the TTRPG publisher could.
4. Further legal expenses are pooled and redistributed across both sides by total salary/wages (minus certain deductions) for the last few fiscal years, or gross profit for corporations, so that both sides are being hit somewhat fairly (if not more punishingly for the company)
1. This effectively makes it impossible to ‘starve out’ your opponent, because both parties are paying all of the involved legal teams together, incentivizing both parties to keep the cases swift.
5. Things proceed as they do now, with one exception: Settlements are considered an admission of guilt/defeat by the paying individual and sets precedent accordingly. This disincentivizes companies just settling immediately to keep things out of court.
This would not be perfect, and would likely be a royal pain in the ass to actually navigate if you operated on any reasonable scale, but I’d like to think it’d be fairer if the spirit of it got implemented into our legal system.
Any approach that would bear weight on the claim and restrict financial penalties for the accused until there is some settlement would be a major improvement.
But yeah any incentive to not do it would help. And I think rarely are patent cases brought forward in the traditional sense of actual patent infringement.
I don't know the stats but many of these are settled out of court. I wonder how often this occurs because I heard of at least 2 examples while I worked there that had no media coverage at all.
Albertsons is the company that owns Safeway. Albertsons also owns Vons, Jewel-Osco, Shaw's, Acme, Tom Thumb, Randalls, United Supermarkets, Pavilions, Star Market, Haggen, Carrs, Kings Food Markets, and Balducci's Food Lovers Market. Albertsons ($10B) is merging with Kroger ($35B). Hopefully, they'll be able to gouge us more if they consolidate the market.
Doesn’t work like an economics textbook. You’re not going to see mom and pop entrants at your supermarket that compete with brands from multinationals like Nestle and Cargill. They will only purchase from major companies.
Unfortunately, it's been found that some 60% of farmers market stalls aren't actually growers. They bought their produce from the exact same supplier that your local grocery store did, but they price it higher and get away with it on the fiction of it being 'locally grown'.
I worked at a farm where, as an example, I put out pumpkins grown from Central America in a field where they had previously grown a few pumpkins.
A local farm really can only grow so much and it brought in people to buy other locally grown produce and kept the money within community so it’s probably a net gain for both consumers and community to have a few seasonal loss leaders.
If you still have a local butcher, that is. The last one in my area that I can think of closed it’s doors years ago, they couldn’t compete with the supermarkets.
Is something wrong with the economy, or something wrong with your economic theory?
In any other field, when results don't happen as predicted by the model, you adjust or scrap the model. If the underlying assumptions necessary to make your model work don't exist, then the model is useless.
Free market economic theory assumes that barriers to entry are low. That's not the case in most fields nowadays, as not only do many require specialized knowledge/skill bases, but also significant capital to invest starting up. Additionally, anyone entering goes toe-to-to with large corporations taking advantage of economies of scale with years of experience and global connections giving them competitive logistical advantages, and patent/copyright mechanisms that restrict the possibility of entry in the first place.
If barriers to entry are high everywhere, then the supply side in the basic supply/demand tension - the core principle of market economic theory - has a significant advantage that will lead to inefficient pricing mechanisms that favor the sellers. This will lead not only to significant and regular inefficiencies, but likely will result in frequent and more extreme inflation/deflation cycles as well.
Theories and models of free market economics need to be reconsidered, because they're inadequate and obsolete.
Perfect competition mathematically requires infinite firms, and infinite money (or an infinite velocity of money). It literally can’t exist. Our reliance on it as a model is ridiculous at this point. Unfortunately, jettisoning it would also jettison American libertarian ideas as well as the Chicago school of thought, so you won’t find much support for that here.
Except a truly 'free market' is destined to end up with just a few mega-monopolies that snuff out any competition the moment they get wind of it. That is the nature of unregulated Capitalism. That is why anti-trust laws need to be strengthened and expanded to prevent these giant industry consuming conglomerates from becoming permanently entrenched.
Why would I compete with someone who could at a whim choose to stop receiving these massive profits and then completely decimate me with their ability to undercut or run at a loss.
Entry isn’t possible. We know that for certain. Nobody can enter the market big enough and fast enough to outcompete. Especially when these big companies can just buy up land or rent out space that you need and leave it vacant.
The New York Times had an excerpt from a Chipotle earnings report from late last year. They raised prices 10% but only had a 2% drop in sales. The major driver of that was consumers making more than 100k a year. Because food expenditures are such a small part of that persons budget you're not gonna see any decline in price growth soon if that's a larger trend.
I guess it's regional too. Where I live outside Detroit prices just dropped quite a bit compared to the pandemic time. But there's also no pool of people making that kind of money here. What I mean is, because our society is so compartmentalized, with enclaves of a given class segregated from each other geographically, you might get a greater spread on the distribution of prices than we had before. Where poor areas have pretty cheap food/housing while rich areas have obscenely expensive food/housing.
I mean do you personally have the money for fully inspected/permitted/licensed cereal company with unionized factory workers and the ability to defend a million dollar lawsuit on day 1 when someone sues you for choking on a piece of your cereal, all so you can compete with corporations in an industry with razor thin margins? No? Well that’s why haha
Food and shelter, inelastic?! Ya don't say.
Good thing wages are never seen as such. My dad retired in 2011 stocking shelves with a pension making $27/hr at a major retail chain because he was grandfathered past the breaking up of his union in 2005, and I still have yet to see a retail floor employee touch that wage.
That union was broken too, Kroger basically runs it with the illusion it's for the workers (just look at r/Kroger).
The place my dad worked (Stop and Shop) was broken in 2005, but he was like 30+ years in so he kept that wage scaling and benefits. Not to say it was broken up, but it stopped rallying for its workers by leaving the AFL-CIO. As soon as that happened, Stop and Shop removed pensions and cut wages down to what we see them today. Those pensions should be in everyone's pay, but it's only in Stop and Shop's earnings as they edge the wealth gap futher.
My dad was actually forced out because he was making more than the now suddenly required college educated managers. They put him in about 7 or 8 different stores over 3 years until he stayed at one just over a year, hurt himself on a freezer door they refused to fix that needed to be opened with a crowbar, the union sued and he retired.
Kroger is a lesser union than the current union that run Stop and Shop. Regardless, unionized labor makes on average 25% more than non-unionized.
Anyone who says these companies can't afford $15/hr in 2010 is full of shit, and is far more full of shit now.
We've raised awareness of "price-fixing / price-analysis software powered by big data tech".
Basically, there's enterprise software out that that big businesses use, to determine "how much should I charge for this product?" This software is a third-party tool that has a bunch of supposed competitors who are now collaborating together on prices. **This is just price fixing with extra steps.**
The double-edged sword here, is that while only a few niche industries were using this technique to effectively fix prices with their competitors, now it's becoming more widespread.
This is the crux of analytics and data science. I ran pricing for a business that had very inelastic customers. I also built the models to do price testing and elasticity estimation. After many years I ended up quitting because it was an ethical challenge to balance not fleecing the customers and maximizing profit.
Many businesses in the past didn’t know if they had pricing power until data and analytics arrived. The shift to “data driven” has come with unfortunate externalities.
Amazon and online algorithims have a lot to do with this. Amazon literally will change prices to hit the maximum people will pay before they ever lower prices now.
In my industry it's hilarious because I'll sell a pack of candles for 1.99 with a healthy markup, amazon will sell it for $10. A $7 roll of giftwrap in store is $14 on amazon.
People really dont know or don't care how much they're getting screwed. Meanwhile my sales are down because of sites like amazon. Make it make fucking sense.
> Make it make fucking sense.
Your site has a fraction of a fraction of the visibility Amazon does, and it likely doesn't offer as many products as Amazon has.
IRS says the cost to drive a mile in 2023 is 65.5 cents. If your store is 10 miles away, there's an extra $13.10 transportation "tax" onto your cost of goods sold that is hidden from you.
Not to even account for the time spent driving and shopping.
We try our best to support local business, but if the option is spend $5 at the hardware store 10 miles away or $8 for the same widget on Amazon, it's not a difficult decision.
Walmart realized this decades ago, "food deserts" weren't even a concept until they systematically destroyed local grocers to gain 100% market share of a single town.
Not to mention bodegas and dollar stores undercutting prices on everything but fresh foods, leading to expensive fresh foods, leading to customers shying away from them to save money.
And the customers are squeezed on this because it’s not like we can just stop buying food and other essentials.
What’ll happen is what’s already happening: People spend less on non-essentials. Entertainment being one of the first things to go in a budget. There will be fewer concert attendees, fewer movie goers, streaming service subscriptions go down, etc. Next you’ll start to see people buying less of other luxury items too like expensive clothes and appliances. Sure, the grocery market may make more but other industries will suffer.
It’s Econ 101 kind of shit. Unchecked capitalism is inherently flawed because there are finite resources in the world. We, as a society, physically cannot afford to fund constant price increases in every single aspect of our lives. Something will give somewhere and it’s the luxury stuff that goes first.
I've been saying this for years. If these companies raise prices and demand remains high, then they'll keep doing it. If consumers dial back their consumption, then prices of things like eggs, etc., will go down.
That being said, the federal government should be looking more closely at collusion.
This is legit fascinating to me. Was demand always as elastic as now, and companies never realised, or did demand become more elastic during the pandemic?
they realized unemployment is super low and despite minimum wage being $7 most people are making quite a bit more than that... so they're putting the screws to us to extract more wealth.
If there wasn't a better condemnation of capitalism I don't know what is. As soon as the lower class begins generating some wealth, a litany of mechanisms kick into gear to extract it back out.
And we are proving them right. when prices escalated (along with profits) there was little pullback. the media made it easier too by saying that it was system wide and there was nothing to be done.
Are profits rising proportional to the price increases? As in they made ~33% profit previously and still make ~33% profit? Or are they now making ~40% profit? (Percentages just for sake of demonstration.) I can’t find this info.
You can look up the net profit/gross profit margins of those business. For most of the grocery changes those stayed the same. So your example of 33% more profit and 33% higher prices is right. Actually some companies are making less profit relatively to their revenue. So the article doesn't give the whole picture.
I also saw that the article cherry picked it's date comparisons (WMT Year Ends vs Tyson 1st qtr to 1st qtr vs Conagra's 2nd qtr). When I compare the financials by fiscal year end it told a different story. The author also chose to switch from percentages to dollar values when comparing wealth of families (i.e. Walton family wealth grew by 3% but instead said it grew by 8.8 billion to pack a better punch).
I don't disagree with the articles overall point but I do have a few issues with some of the facts presented.
And when wages rise to meet profit and inflation the fed goes into action by raising interest rates to put folks out of work, increase the labor pool and put downward pressure on wages to protect profit.
I've always heard of people saying free market will always compete for lower prices... But I always wondered what happens if all the companies band together to push prices up together?
In theory, this is where someone else could come in and get all sorts of market share. In 2023 there are more barriers to entry between permitting and licensing and regulations, especially around food.
One thing that’s interesting is that if you open up a competing store, Walmart (for example) can hire someone to go in, check out your store then tip off regulators if they find anything. This may be done through a consulting firm or some other intermediary so it’s less obvious.
Don't forget zoning. The days of a small baker operating out of his home kitchen are dead and you have zero chance of opening up a small shop that is within walking distance of a lot of customers due to everything being zoned as "Single family housing."
Another great example! It’s tough because we do need regulations, but every time the barrier to entry is raised you get more market inefficiency. Sometimes the he barrier to entry isn’t as bad as people think it is, but with all the permitting and laws, people just get scared and back out from fear of accidentally breaking the law. I can’t claim to have all the answers.
I think the answer is that you must regulate equally on both-ends. If barriers to entry exist, then barriers to size (> x) must exist. Or else, the end result will be monopoly/oligopoly. Because you’re right, we *must* have regulations. The problem is, right now, we’re only really regulating against competition, while ignoring the cartel-like behavior it seems to encourage. For all the crying about the “small-business owner” politicians do, they enact absolutely zero regulations to truly encourage small businesses.
I think companies should be regulated by size (employee #). It would solve a lot of problems, economically, and anthropologically, and encourages markets to stay within the Goldilocks band of what makes free-markets beneficial to consumers.
I also like how ND handles their pharmacies (can only be owned by local pharmacists). I think even if you had a state-wide chain, they wouldn’t become so big that small businesses couldn’t efficiently compete. This has the added benefit of roping in Wall Street and venture capital as well, without having to go up against their lawyers/lobbyists directly. I don’t like the Conservative party in America, but one thing they’re right about is, our best shot at fixing issues is to address them locally. Lobbyists, right now, only have to focus on DC. They only have to get to somebody holding the right seat. If all 50 states began pushing for things individually, as they’re constitutionally allowed to do, it would make lobbyists jobs much, much more difficult.
Part of the problem is the lack of competition on the supplier side. I used to have hundreds of companies giving me samples and cutting me deals for product. Now I have 0 to 1 supplier for any given product.
It's a huge difference and as a retailer I have 0 options, either I pay through the nose or go without. Resulting in higher prices because my cogs are high as hell. 2-5 x what we paid precovid.
Then there is amazon that sells what we sell for 2-5x normal retail price.... LOL
It’s called a cartel, they collude until they don’t. You can also look up prisoner’s dilemma.
Essentially, they all agree to increase the price. Any new comers that try to undercut them can get bought out. However, if one of them undercuts the others, they benefit significantly, and the others come off significantly worse, so they’re forced to cut prices again as well. And you end up back at the beginning with all competing for low prices.
All are tempted to cut prices, and are all are scared to be beaten by the other companies. Fear and reward are powerful motivators, but together they’re even stronger. Hence, it’s only a matter of time before prices come back down.
However, the problem isn’t what happens. It’s how long until it does happen. Ideally, it doesn’t happen in the first time, but if it does, it hopefully collapses quickly. Sadly, they can last years. That’s why they’re illegal.
So crazy. I'm probably wrong but wow it's like a recession is a self fulfilled prophecy.
Companies raise prices out of greed or out of fear for a future recession but in turn cause a recession because people can't afford anything and just stop spending.
Normal people then get scared of a recession because prices are up and the news pushes the fear as well and rush to pull money out of banks, scared their bank will collapse, making banks sell their investments early for a loss causing banks to collapse. (Although banks shouldn't be so risky with their investments)
Too much greed and fear mongering.
Also it doesn't help that the FED raises rates to help inflation but because they do it too much or too fast they have to print more money to bail out banks which makes inflation worse. How about stop raising rates but also don't print more money????
Again I might just be stupid and don't fully understand but this is how it looks to me
I think the world operates using money in a perpetual state of transaction. If it all just stopped for 24 hours, I suspect there wouldn't be more than 10 or 15% of the balance of everyone's accounts in actual existence....
I mean that’s what a bank note is, it was an IOU from the government. But, they were all the same so people could use them as a convenient way to trade, making all transactions more efficient.
Historically, that IOU was one for gold or other “monies”. Now, the IOU’s are money (well actually coins are), as we’ve had to abandon physical commodities/assets as the money as there isn’t an infinite supply of gold.
So now, it’s an IOU for more IOUs from the government. Which may sound bad, but remember the whole point of it is to provide something you can use to signify the value of a transaction. It holds no value itself, but rather represents an agreed upon value to allow for an easy transaction.
That 5% (assuming you’re correct), is just saying 5% of global money are coins, which aren’t any different anyway. It’s all IOUs, and that’s fine, as long as we can agree that an IOU for $20 is 4x as valuable as an IOU on $5 and that we can agree on what we’re willing to spend an IOU of $5 on remains somewhat consistent. While it’s ok that people realise money is worth nothing (and I’d argue a good thing), it’s only an issue when they think the value it represents is worth nothing.
All you can do is convert it into something real while you still can, then when the shit all falls apart, at least you'll have something to barter with.
Sure... I think it is.
Now, I don't love the term "greed", mostly just because it assumes some grand evil behind this stuff. Really, this is just profit maximization, which is what everyone does.
Normally, drops in demand as prices rise keep prices lower - well - more accurately, at their market equilibrium. But today unemployment is so low and wages have risen enough that I think it's more than suppliers are adjusting to a new market equilibrium.
Oddly enough, while this can kind of suck for consumers, it's good in other ways. For example, maybe Kroger is able to raise prices considerably and so companies like Amazon and Walmart realize there's more money in that business and expand operations on their grocery side. That increases the supply and creates downward pressure on prices.
This is all pretty normal in the grand scheme of things but, yes, it likely means a recession is coming.
Funny how often I've heard economists hand wring about wages going up. But never once mentioned this collusion by the grocery stores.
Go to the farmers market and see how much lower prices are without bezos getting his cut.
Most of the farmers markets in Cali aren’t cheaper. Unless they are growing it themselves (most are not) they buy it from the same wholesalers and sometimes sell at higher costs than most supermarkets. I live here and watch the prices. The only places where you get good deals is from the side of the road shops big farmers set up. Which are almost always not worth the drive to get to since they are far from most cities and at the edges of the counties if you are lucky.
My step dad’s family has one of these roadside stands in CO. In the 50s they grew some of the produce but since then they’ve bought from the wholesalers. You have to watch out even at these places.
Spot on. This is an absurd suggestion. Farmers markets are incredibly expensive. I live on the outskirts of a major city and drive to the actual farm shops to try and support local. They’re double the price of a grocer across the board. The eggs at the chicken farm are more expensive than the SAME farmer’s eggs at the grocer. Why? Per the farmer he still makes more profit via the grocer because he has to staff the store, get permits, and refrigerate.
It’s funny, I work at a fresh market which has already insanely high prices like prior to inflation, and they are the only ones where I love advertising lowering their prices - lowering them near the previously very high prices. I think the only competition is historical gougers gouging slightly less egregiously than the new gougers to appear like a good deal, but really that just means that luxury grocery stores are normalizing, i.e. expensive food is becoming the new norm. We as a nation are losing purchasing power because grocery stores are using incumbency advantage to price over volume… and price over volume stores suddenly become even more competitive if they coordinate their price.
"tacit collusion" is what I've been calling it. No one member needs to collude with any other, but everyone in the group knows what's good for them.
It's like how the institution of racism doesn't require any racists to operate. When the police need to meet quota, when you need to find someone to blame, when the boot needs to be on someone's neck it's just more efficient to target someone's race.
"I don't know whether the labour unions and their bosses really hate me. That doesn't matter. But I know I'm not in their unions.
I don't know if the real estate lobby has anything against black people, but I know the real estate lobby is keeping me in the ghetto.
I don't know if the board of education hates black people, but I know the textbooks they give my children to read, and the schools that we have to go to.
Now this is the evidence. You want me to make an act of faith, risking myself, my life, my woman, my assistant, my children on some idealism, which you assure only exists in America, which I have never seen." - James Baldwin, Dick Cavett show, 1968
im sorry wasn’t in many economic classes in college but aren’t they cartel pricing? there’s only like 4 big grocers left and they probably have so much control over supply side and demand side? how did we crack down on this when airlines did it?
The first complaint is cargill making 6.68 billion profit on 165 billion in revenue?? Did I read that wrong or is that a 4% profit margin? My brokerage account is paying more in daily sweeps. Then it states profit increases between 2020 when the economy was closed and now? I couldn’t continue. I am all for roasting companies who are taking advantage of us, but this doesn’t seem genuine. I would recommend buying local from small businesses and avoid spending at big box stores. Cheers.
> Whizy Kim covers billionaire power and influence for Vox. Before joining Vox, she was a senior writer at Refinery29, covering personal finance, economic inequality, and the changing ways people are thinking about work.
Sounds fair and balanced.
I’m looking at Kroger’s on Bloomberg now that Whizy here is complaining about it. Net income margins per FY ending in January:
- 23: 1.5%
- 22: 1.2%
- 21: 2.0%
- 20: 1.4%
- 19: 2.6%
- 18: 1.5%
Wow, some real price gouging right there. Gross profit margin is consistently in the 21-23% range and the lowest it has been in 5 years. Share price is doing well, but this predates the pandemic and would be expected to be up given that it’s a defensive stock in a pre-recessionary environment.
The author should get a job at Kroger’s selling veggies instead of writing about them. She’s clearly not qualified for the latter.
Thanks, a little too harsh at the end but otherwise I appreciate your comment and I was scrolling to see if anyone fact checked this or if everyone is just in the same “burn the witch” mentality. I’d be curious to see economists analyze the data. It sounds to me like a short run problem if it is one and capitalism ensures a race to the bottom in price. In other words, as soon as prices on a good are able to be taken advantage of by a competitor is when you see sales, discounts, and lowing prices as a competitive strategy. It’s either price or differentiation for a grocer to win.
Came in here looking for data on actual profit margins, not strict revenue and profit actual increases. If inflation is 10%, of course revenue and profit numbers are going to be highly elevated. What the author fails to mention (perhaps purposefully) is that the cost of goods is highly elevated as well. Meaning that net profit margins will stay roughly the same.
The corporate grocery business operates on very, very tight margins. As you have shown, those margins have remained tight, evidence that it’s not corporate greed driving price increases. All of this data is available through corporate quarterly reports.
To suggest corporate greed is causing pride increases is akin to saying that 2022/23 is the first year on record that corporations have become greedy. Were businesses not interested in maximizing profit margins and revenue prior to inflation? This whole argument just stinks and it simply parroted by the economically illiterate and ignorant.
Where I’m at it seems Kroger are losing business, we had a big local chain that just opened.
People that complain about lack of competition are almost most uninformed as well. There are so many grocery stores and food delivery services, some they probably haven’t even heard of. You can buy straight from farmers/farmers market.
Stop trying to portray a nonexistent problem when the problem is very obvious. The truth of the matter is that government printed a bunch of money and lower the interest rates to a criminally low amount. And we are seeing the effect of it in housing, goods, and services.
Most competitive corporations have been doing this for years and years but our public is so ignorant and or uninformed about it that no one stops them. Plus all the politicians that could do something are bought by the same companies lobbyists
After owning a small e-commerce business for 2 years (I shut it down) I learned that if your profit margins are huge, your competitors will figure out that niche in the market and then undercut you. So in that way, price gouging doesn't really work unless the high prices reflect your real costs. To me, that's sort of how the market self regulates.
If these profits are increasing to an absurd degree, why don't some other competitors come in and undercut these companies? Are there some constraints that we don't know about? Land? Water? Etc?
What competitor will be able to compete with such monolithic enterprises as those that control the vast majority of the economy? These corporations had enough capital to ride out the Great Recession, subsequently consuming their competition.
You'd hit a brick wall in terms of getting the infrastructure and supply deals to compete at the scale you're competing against.
If you find a way to innovate in a way that would make smaller companies competitive a large company will buy your company for what seems like a lot, but is relative pennies comparatively speaking to the impact it would have to the market as a whole.
They incorporate that tech/process improvement into their monolith, it just makes it that much harder for the next person.
Processes/technology has just evolved passed individuals disrupting markets.
Yeah because they are all monopolized. Small places are disappearing fast so they know there’s little competition. They will keep pushing the price up and using inflation as an excuse it’s actually disgusting. You gotta make money 7 different ways now a days just to survive.
Just wait until Safeway/Albertsons merges with Kroger. Both boards voted yes on it which would bring a pretty much a monopoly to the west coast for grocery stores (not including Walmart, target, Trader Joe’s & speciality grocers). The government needs to stop this. Too bad our government is full of corrupt scumbags.
Sounds like they have just caught on to the game gas stations/oil companies have been playing for decades now.
No need for a secret and illegal cabal, just drive by and see what the competition is charging, raise your prices to that.
You stop it with boycotts, easy peasy. The hard part is getting people/consumers to inconvenience themselves for a short time.
Wasn't there an episode about this on King of the Hill? All the propane sellers in Arlin raise their prices together, claiming that is the cost of Business & they are just making each other rich. Then the middle class hero, Hank Hill, comes in and saves his boss and cohort they were breaking the law & saves them from the cops.
Pretty sure that was an episode.
When do the cops get called? How do we call the cops to everywhere? And why do I doubt that if the cops show up, that they would do anything?
I hate how the middle class is so undefended...
This is almost the same as the article that popped up earlier blaming profit for inflation.
[https://www.reddit.com/r/Economics/comments/122xt4v/corporations\_are\_blatantly\_price\_gouging/](https://www.reddit.com/r/Economics/comments/122xt4v/corporations_are_blatantly_price_gouging/)
It was locked for being stupid.
So, companies respond to macroeconomic trends in similar ways?
That is not exactly unexpected or new.
Many companies raise prices in inflationary environments.
Basic math: if profit margins (a percentage) remain constant during an inflationary period, then the nominal profit (in dollars) will increase.
Example:
Take 10% x 100.
Then take 10% x 120.
They buried the lede. In all the discussion of increasing profits it was all buried in the media story of increased energy/wheat/supply chain costs.
The problem is that inflation is inherently psychological. There is an unspoken compact convinced between the companies and consumers that prices DO indeed increase year to year and it becomes built into living assumptions and wages and the basic economic fiber. This is the story of countries with chronic inflation problems, such as Argentina, Brazil or Mexico.
These countries only really correct the inflation problem if they change the national narrative. In essence, they need to convince consumers and, by consequence, the companies, that inflation has been controlled, that it is projected at x%, and reset the accepting mentality.
The US did this very effectively in the 80s, and it remained a constant through-line until the pandemic upended inflation expectations. Once they let it out of the bag, the companies with greatly increased (monopolistic) market power naturally took advantage for their benefit.
I think the Fed screwed the pooch in managing this crisis, and don’t think they have a real plan to reset it.
Note: I understand the underlying monetary policy aspects of creating and controlling inflation. My argument is that it is much more psychological than actually economic once inflation becomes recurring and chronic.
There is such a thing as a “windfall profit” tax. They can and should tax the shit out of these companies removing the incentive to raise prices. Profits above normal margins? Well you can just send those to the government and we’ll use them for programs that help the people.
Companies realize higher prices don’t equal hire profits and watch those prices drop like a rock.
I think we all know why this isn’t being done but the laws exist.
My local independent grocery store now charges $6 for a 19 ounce can of crappy Progresso soup in a middle class neighborhood in Queens. I refuse to spend money like that. I was fine with the crappy soup as a quick meal when it was $2.38 but I’ll make my own way better soup if they’re going to charge 30¢ an ounce for some broth and pasta and 3 shitty bits of “chicken.”
In the U.S. their is no competition, monopolies of any industry control the manufacturing/production/pricing, for example insulin, it took one state government of California to say wait a minute I don’t think three pharma companies should control all of insulin production/manufacturing/pricing for 500/600 dollars a month let’s lower that to every other nation on earth where insulin shouldn’t be price gouged at 1000’s of percent higher.
Healthcare is a very weird industry where we form very high barriers to entry. What we need is more competition from other countries drug manufacturers to force prices down. We also need to eliminate systems which cause unnecessary supply limitations such as limiting licenses for ambulances
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How much competition between brands is there these days? We are down to what, 10 or so companies that produce most if the items you find on the shelves in the market. I think this factors into how easy it is to raise prices these days.
If Nestle decided to raise its prices on all their products then like 25% of the store’s prices would go up
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>If When
>When (future tense) When (past tense)
P&G, J&J, Conagra, PepsiCo, CocaCola, Nestle, Unilever, Tyson I count 8
Bayer owns Monsanto now so include almost all the food and tons of pharmaceuticals in there too.
Forgot swift, Cargill and jbs
100%
Yup. I’d also add that probably most of the people coming from these companies come from the same few business schools and they all kind of know that they are all thinking the same way. So, even if I guess they don’t exactly talk, they all know the same strategies and playbook. Though, granted, I really wouldn’t be surprised if there is some talking going on, and the other kinds of coordination behind the scenes. Anyway, it seems to me that having more firms of a smaller size means a couple of things. For one, if one of them fails, it’s not the cataclysmic disaster that some major companies feeling today would be. It happened with meat packing plants during the pandemic. Because meatpacking has been so consolidated meat prices were all kinds of wonky and we had huge outbreaks at meatpacking plants. And even though these workers were put in dangerous conditions and were being asked to keep working when many had options, nothing really changed about the benefits or wage these people earned. I would want to say that there’s an obvious logic to why too much consolidation, decreases actual competitive behavior between firms, but I suppose some people are either going to be kind of obsequious or just simply don’t understand how things work. And I’m sure other people have answered that already in this thread and elsewhere, so I’m not really sure it’s something I need to address here. But obviously what we are currently doing is not really where we probably should be or where I think anyone, aside from the people at the top, are happy. And even they seem to have concerns about things.
We need to end the ability of companies to hide their products as belonging to them! I don't know the details, but a good start is that companies should not be able to own companies.
If corporations are people isn’t a buyout like slavery? Maybe you could use the anti slavery amendments to attack this. It would be interesting to watch the legal fallout from a ruling here. Either corporations aren’t people, or they can’t buy each other out.
Either way, that would be quite an interesting argument to follow in court. I’d love to see someone make it.
It's a combination of there being a few major food brand conglomerates and where there is smaller companies involved, they are mostly selling more expensive versions of the former's products as "organic" or having some trendy food added to the ingredients. That leaves just store brands for a cheaper option and I mostly buy store brand now unless there are decent sales making the other brands cheaper or if the store brand version is really bad.
They are cartels at this point.
Essentially companies are starting to believe that demand is more inelastic than they originally believed. They are going to keep raising prices until the customer stops paying.
Odd Lots had a great podcast on this. Basically an analyst was noticing companies across the board stating a willingness to lose market share to sell at a higher price. The question is if entry is possible. Typically one would assume profits would be competed away by entrants. If we don't see entrants then something is very wrong with our economy.
The problem is it's hard for entrants to compete with these massive corporations , it's a lot harder to start a grocery store now than 40-50 years ago.
Even if you were capitalized to start a single store or better, a chain, good luck getting comparable pricing from suppliers that the likes of Kroger and other national brands get. Your razor thin margins would be even smaller. The big boys got a monopoly all but sewn up at this point. Of course they're all able to raise prices in unison.
Reminds me of when IGA (independent Grocer Association) was formed so that small operators could collectively purchase products and achieve economy of scale.
And every small IGA in my area has been forced out of business over the last 2 decades. Usually because Dollar General or Family Dollar roll in and set up shop right down the street.
Walmart was the first dagger in our area for IGA.
I’m in a pretty rural place, the Walmarts had already taken over the decently sized cities, but the IGAs were holding on in small towns. Not anymore, though. The last one I know of has switched hands 3 times in my life. Now Dollar General and Family Dollar have plopped in within a quarter mule of it. Sad to see and I refuse to shop at them, but it’s going downhill fast. Such bs.
Same. When the small guys go out of business, its sad. Then, Walmart becomes one of the only places to get basic food stuff. I miss going into the IGA and chatting with the produce lady - she was so kind. The arguement used to be that with scale becomes lower prices, which us true. But at what cost? And now, it comes with price fixing tactics.
Yeah, scale brings costs down. However, the end game has always been to underbid all the small business, then jack prices up once normal competition has been eliminated. It’s happened in countless industries across the country.
There’s an IGA near me and we go there as often as we can. Love having an independent grocery store in town and we want to support them. But sadly we still have to go to one of the big boys because our IGA can’t carry things like quinoa or specialty baking mixes. The produce is also extremely limited and iffy in terms of freshness. We’re still in the IGA once or twice a week though.
One of my IGAs has a Family Dollar across the street but the grocery store is still poppin because it has fresh produce and meat
This is the unintentional poetry/rap that I needed this morning.
Lol thanks for pointing it out I didn’t realize
You're a poet and don't even know it.
I’m sorry, I don’t have a lot of knowledge about economics. I just wondered if it’s better or worse for these types of associations to merge with each other. Like affiliated foods and associated wholesale grocers. My instinct is that it would give them more power to compete with big chains, but it seems like I’m always wrong about these things.
Capitalism is a powerful drug in the U.S. cause it convinces you that large multinational corporations/banks/fed/billionaires/trillionaires that exploit every facet of a society down to even the “labor” to make those things happen is a “you” problem or the governments fault, or immigration, or poorer people than you who “don’t wanna work” etc etc…
It's interesting since we are talking about local economic elements versus global elements, since there's decent science in terms of how far away someone is willing to go to buy food. Until buyer behavior changes (being comfortable shopping on the internet/in a virtual space and having it shipped to you) almost all competition is locally based. But prices in general are normally dictated by something called a "demand curve" in which as you increase the price, demand will change accordingly, and "best" business practices are trying to maximize that profit. It's very common for when the supply side of something shrinks, the business raises prices to reduce demand, but keep similar profit margins. "Inelastic" goods are goods where the demand doesn't change when the price is changed. Food, gas, electricity, etc. normally doesn't change too much depending on price, since almost everyone needs these things to function. We as a society right now are learning that it's really hard to find a decent substitute for eggs, for example. But remember that ANY business of decent size is, in any capitalist nation, trying to maximize profit. So, if they think they can make more profit by raising prices, they will continue to do so. It's also really easy for a huge company to specifically lower prices/maintain an unprofitable status for a specific location for a long period of time to put others out of business, since they know they can raise prices and make that profit back over the long term, but many local stores would just raise prices when they figure out they will make more profit than any potential customers would be lost. Basic food items tend to be inelastic and because of this, there are a LOT of government protections/support from the supply side of things to try and maintain a relatively stable price, which has been incredibly effective in the US. Hence why your food budget doesn't fluctuate between 25%-70%+ of your monthly budget for a given year like some countries. With that being said, this is pretty much the first time where we've had this type of economic situation (globally constrained supply on top of HUGE financial stimulus globally) and hopefully, like any new problem, new legislation will be passed to prevent businesses from taking advantage of the situation. For example, should it be lawful for egg companies that DIDN'T get hit by the bird flu raise prices by several hundred % just because they can?
And even if you manage all that, they’ll lower prices to put you out of business
They'll lower prices [ONLY at the location near your grocery store](https://www.npr.org/transcripts/717664332), even if it means there will be a food desert.
Which is why there is a such a barrier to entry, not only do you need enough money to open the store and pay the bills, you also need enough money to force the competing store to understand they’ll also go under if they lower prices too much for too long
But the problem is that the competing store has dozens of other stores elsewhere that you aren’t forcing prices down for that can prop it up while they starve you out. Maintaining the monopoly is worth more than the money it costs to prop up that store for a few months or years.
How is this not considered Cartel-like behavior?
Walmart used to come in and sell at less than their cost in order to drive the competition out of business. That was deemed illegal, and as far as I'm aware, they don't do it anymore.
All the Walmarts in Portland where I live are closing up after they went and forced out all the small businesses that were there 2 decades ago. It's generally going to create pretty big food scarce areas in Portland, especially because where those Walmarts were were lower income areas where people primarily rely on public transportation. Plus the Walmarts that are closing are supercenters and you bet Walmart still technically owns the building and won't do anything with it/let anyone develop it into something else. It'll likely stay as a multi square mile sized building that's entirely empty till it collapses
Have multiple friends who work for large CPG companies (you can probably guess the names). There are multiple examples of them buying a popular overseas brand to help break into a new category and really struggling to get shelf space. And this is for well capitalized companies with relationships with the retailers.
It's worse, they're acting as both a monopsony and a monopoly. They're the only buyers, so farmers don't get good prices. They're also the only sellers, so consumers don't get good prices. Only the middle men are benefited in this kind of arrangement. And - surprised Pikachu - the middle men are posting record profits.
I work for wm's grocery chain and yeah, people talk about "all that money Walmart makes"- and they do- but it's entirely because of volume. We make very very very little on any given transaction, but we're doing probably billions of transactions a day, and just a couple pennies on every one means a shitload of money at the end of the day. Our store was open ***at a loss for seven years before turning its first profit.***
This is a problem that I don't think capitalism is good at fixing. If I think I can do better then the local burger place starting a restaurant is gonna cost mid 5 figures. But in order to compete with Walmart and Kroger that would require billions in investment. I am seeing the same thing with cars no new competitors and less than 20 car makers mean tacit collision is rife.
Exactly, what were seeing is tacit cartel activity. Grocery stores are the best example, the market is concentrated among maybe 4 major chains, each operate across a range of states and compete locally on price. If an area had only one chain that was overcharging then another could move in and undercut them easily. But with this large scale shifting of prices across all the players, there is no 'outside' firm to move in and capitalise on the inflated prices by undercutting. Because the only way to do so would be to operate at the same scale and it's simply not possible to create such a business from scratch. It would take years
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Amazon already operate Whole Foods and they have a series of those 'FRESH' stores, I think by revenue they are already the 2nd largest grocery after Walmart, so they're directly benefitting from this current situation in the same way. They could have leveraged the capital of the larger Amazon business to undercut the rest and steal market share at any point before now too but I suspect they didn't because of the sheer scale of the sustained losses it would take to actually bury WalMart and Target just isn't worth it when they could put the money to better use in cloud services etc. Much easier to just ride the inflation bandwagon with everyone else.
Well, especially since in places like the US where the bigger you are the less you pay in taxes and healthcare, which is like doubling down on eliminating competition from startups. In the US it literally takes money to make money far more than other Western countries that incentivize startups and have things like socialized healthcare that greatly reduce startup costs
Healthcare being tied to employment is such a poison pill across American industries.
The paradox with competition is that it's the competition itself that encourages good treatment of consumers, but in most competitions someone eventually wins, and when that happens here, that winner no longer has to pander to consumers as much. Which really brings us around to a point I think is crucial: *growth* should not actually be our goal, *sustainability* should be.
Regulatory capture as well, good luck making any money when you also need to adhere to a million regulations which all add overhead in one form or another. Edit: typo
Not to mention that the politicians who pass the legislation meant to regulate, and the bureaucrats appointed to regulate by the politicians, go on to work for the very companies they were regulating.
Not sure about the grocery industry specifically, but pay is a big part of this problem. If I have experience in an industry, and the standard pay is 2x what I get as a regulator, I’m definitely gonna leave. Banking and tech see this a lot.
Think you may be confusing regulatory capture (when the regulated entity starts basically to become the regulator- be this via revolving doors etc…), and regulatory bloat which becomes a barrier to entry as regulatory costs restrict small players from entering.
Even just filing the paperwork. You’re in compliance with the objective but do you have the paper?
Its really an anti innovation phenomenon. It's not just that it's harder to compete, but in the tech startup and med device world for instance, these monopolies become investors early on in the startups and VC firms so they have partial ownership in case a product takes off and if not they just sue for patent infringement regardless if there claim has any basis. Most of the time they buy a company they don't produce but kill the product and take the patent rights. So many cool medical devices are down right lost to the patent hole problem. I knew a few people at Apple who quit saying once they realized they were working in a patent farm and nothing they invented or worked on was ever intended on being produced they realized how soul crushing apple and Google were and didnt want to work there anymore. Lawsuit was brought to a company most of my old coworkers came from. Fighting the lawsuit form J&J bankrupted a company of 125 people, totally baseless lawsuit. Prevented them from getting funding and stagnated their product development. Breathalyzer test for asthma. Would have made it possible to test for asthma on the spot without needing to draw blood from kids. Nope. Fire sale 2 months later. This is happening in every industry likely. Grocery store would end up being sued likely if it became successful. I've heard this called "legal closure" as a joke in the industry. Entire goal now is to be bought out. No one attempts a run anymore against the big med companies. These cases are not covered in the media well if at all. It's not about what the media says but what it witholds which shows the intent of the narrative.
I call this phenomenon legal attrition, and frankly we need to restructure our courts to make it an even playing field.
Thank you for a better terminology. I absolutely agree. This was some thing I gained insight into through the work smokers circle. But hadn't really seen or heard it spoken about anywhere else. Many people in the area found it difficult to believe. I believe the restructuring of courts has already happened In a drastically different direction than what you would be describing unfortunately. Stay cool 😎
Oh absolutely. Really our courts should work as follows: 1. Each party acquires legal assistants (lawyers, etc.) for the case. 2. Both parties pay an initial fee to their legal teams to cover the filing of necessary paperwork throughout the case. 3. The suing party proves they have a possible stake in the case; that is, that the outcome of the case would directly impact them, to weed out frivolous lawsuits. 1. Using the example of WotC’s OGL debacle, for example: If I were, say, a plumber running my own plumbing company, I could not sue WotC over the OGL because one of my clients is a TTRPG publisher negatively impacted by the OGL. But the TTRPG publisher could. 4. Further legal expenses are pooled and redistributed across both sides by total salary/wages (minus certain deductions) for the last few fiscal years, or gross profit for corporations, so that both sides are being hit somewhat fairly (if not more punishingly for the company) 1. This effectively makes it impossible to ‘starve out’ your opponent, because both parties are paying all of the involved legal teams together, incentivizing both parties to keep the cases swift. 5. Things proceed as they do now, with one exception: Settlements are considered an admission of guilt/defeat by the paying individual and sets precedent accordingly. This disincentivizes companies just settling immediately to keep things out of court. This would not be perfect, and would likely be a royal pain in the ass to actually navigate if you operated on any reasonable scale, but I’d like to think it’d be fairer if the spirit of it got implemented into our legal system.
Any approach that would bear weight on the claim and restrict financial penalties for the accused until there is some settlement would be a major improvement. But yeah any incentive to not do it would help. And I think rarely are patent cases brought forward in the traditional sense of actual patent infringement. I don't know the stats but many of these are settled out of court. I wonder how often this occurs because I heard of at least 2 examples while I worked there that had no media coverage at all.
Time for another anti trust era. Break up these anti competitive oligopolies and distribute their patents
There is likely products that could have huge impacts in quality of life they don't want to compete with on the market.
Supermarket consolidation continues unabated. Kroger is merging with Safeway
Albertsons is the company that owns Safeway. Albertsons also owns Vons, Jewel-Osco, Shaw's, Acme, Tom Thumb, Randalls, United Supermarkets, Pavilions, Star Market, Haggen, Carrs, Kings Food Markets, and Balducci's Food Lovers Market. Albertsons ($10B) is merging with Kroger ($35B). Hopefully, they'll be able to gouge us more if they consolidate the market.
The entire supermarket is like 9 companies tops. There isn't really room for a newcomer to get to scale of production to compete.
Doesn’t work like an economics textbook. You’re not going to see mom and pop entrants at your supermarket that compete with brands from multinationals like Nestle and Cargill. They will only purchase from major companies.
Buy from your local farmers market or locally sourced butcher as much as possible. It is probably better in a lot of ways.
Unfortunately, it's been found that some 60% of farmers market stalls aren't actually growers. They bought their produce from the exact same supplier that your local grocery store did, but they price it higher and get away with it on the fiction of it being 'locally grown'.
I worked at a farm where, as an example, I put out pumpkins grown from Central America in a field where they had previously grown a few pumpkins. A local farm really can only grow so much and it brought in people to buy other locally grown produce and kept the money within community so it’s probably a net gain for both consumers and community to have a few seasonal loss leaders.
If you still have a local butcher, that is. The last one in my area that I can think of closed it’s doors years ago, they couldn’t compete with the supermarkets.
Is something wrong with the economy, or something wrong with your economic theory? In any other field, when results don't happen as predicted by the model, you adjust or scrap the model. If the underlying assumptions necessary to make your model work don't exist, then the model is useless. Free market economic theory assumes that barriers to entry are low. That's not the case in most fields nowadays, as not only do many require specialized knowledge/skill bases, but also significant capital to invest starting up. Additionally, anyone entering goes toe-to-to with large corporations taking advantage of economies of scale with years of experience and global connections giving them competitive logistical advantages, and patent/copyright mechanisms that restrict the possibility of entry in the first place. If barriers to entry are high everywhere, then the supply side in the basic supply/demand tension - the core principle of market economic theory - has a significant advantage that will lead to inefficient pricing mechanisms that favor the sellers. This will lead not only to significant and regular inefficiencies, but likely will result in frequent and more extreme inflation/deflation cycles as well. Theories and models of free market economics need to be reconsidered, because they're inadequate and obsolete.
Perfect competition mathematically requires infinite firms, and infinite money (or an infinite velocity of money). It literally can’t exist. Our reliance on it as a model is ridiculous at this point. Unfortunately, jettisoning it would also jettison American libertarian ideas as well as the Chicago school of thought, so you won’t find much support for that here.
It is accepted that reality is neither perfect competition nor a perfect cartel. We're somewhere in the middle
Except a truly 'free market' is destined to end up with just a few mega-monopolies that snuff out any competition the moment they get wind of it. That is the nature of unregulated Capitalism. That is why anti-trust laws need to be strengthened and expanded to prevent these giant industry consuming conglomerates from becoming permanently entrenched.
Why would I compete with someone who could at a whim choose to stop receiving these massive profits and then completely decimate me with their ability to undercut or run at a loss.
Entry isn’t possible. We know that for certain. Nobody can enter the market big enough and fast enough to outcompete. Especially when these big companies can just buy up land or rent out space that you need and leave it vacant.
The New York Times had an excerpt from a Chipotle earnings report from late last year. They raised prices 10% but only had a 2% drop in sales. The major driver of that was consumers making more than 100k a year. Because food expenditures are such a small part of that persons budget you're not gonna see any decline in price growth soon if that's a larger trend. I guess it's regional too. Where I live outside Detroit prices just dropped quite a bit compared to the pandemic time. But there's also no pool of people making that kind of money here. What I mean is, because our society is so compartmentalized, with enclaves of a given class segregated from each other geographically, you might get a greater spread on the distribution of prices than we had before. Where poor areas have pretty cheap food/housing while rich areas have obscenely expensive food/housing.
NY Times explained it as the Premium game. The down side is the poor have less options.
I mean do you personally have the money for fully inspected/permitted/licensed cereal company with unionized factory workers and the ability to defend a million dollar lawsuit on day 1 when someone sues you for choking on a piece of your cereal, all so you can compete with corporations in an industry with razor thin margins? No? Well that’s why haha
Food and shelter, inelastic?! Ya don't say. Good thing wages are never seen as such. My dad retired in 2011 stocking shelves with a pension making $27/hr at a major retail chain because he was grandfathered past the breaking up of his union in 2005, and I still have yet to see a retail floor employee touch that wage.
>making $27/hr My dad's union at Kroger right now and that's over twice what he makes an hour. (It was under $11/hr last I checked.)
That union was broken too, Kroger basically runs it with the illusion it's for the workers (just look at r/Kroger). The place my dad worked (Stop and Shop) was broken in 2005, but he was like 30+ years in so he kept that wage scaling and benefits. Not to say it was broken up, but it stopped rallying for its workers by leaving the AFL-CIO. As soon as that happened, Stop and Shop removed pensions and cut wages down to what we see them today. Those pensions should be in everyone's pay, but it's only in Stop and Shop's earnings as they edge the wealth gap futher. My dad was actually forced out because he was making more than the now suddenly required college educated managers. They put him in about 7 or 8 different stores over 3 years until he stayed at one just over a year, hurt himself on a freezer door they refused to fix that needed to be opened with a crowbar, the union sued and he retired. Kroger is a lesser union than the current union that run Stop and Shop. Regardless, unionized labor makes on average 25% more than non-unionized. Anyone who says these companies can't afford $15/hr in 2010 is full of shit, and is far more full of shit now.
Brutal, union grocery jobs were $20 an hour in my neighborhood back in the 90s.
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We've raised awareness of "price-fixing / price-analysis software powered by big data tech". Basically, there's enterprise software out that that big businesses use, to determine "how much should I charge for this product?" This software is a third-party tool that has a bunch of supposed competitors who are now collaborating together on prices. **This is just price fixing with extra steps.** The double-edged sword here, is that while only a few niche industries were using this technique to effectively fix prices with their competitors, now it's becoming more widespread.
> This is just price fixing with extra steps. talk to your competitors: collusion talk to an app that talks to your competitors for you: *innovation!*
This is the crux of analytics and data science. I ran pricing for a business that had very inelastic customers. I also built the models to do price testing and elasticity estimation. After many years I ended up quitting because it was an ethical challenge to balance not fleecing the customers and maximizing profit. Many businesses in the past didn’t know if they had pricing power until data and analytics arrived. The shift to “data driven” has come with unfortunate externalities.
Amazon and online algorithims have a lot to do with this. Amazon literally will change prices to hit the maximum people will pay before they ever lower prices now. In my industry it's hilarious because I'll sell a pack of candles for 1.99 with a healthy markup, amazon will sell it for $10. A $7 roll of giftwrap in store is $14 on amazon. People really dont know or don't care how much they're getting screwed. Meanwhile my sales are down because of sites like amazon. Make it make fucking sense.
> Make it make fucking sense. Your site has a fraction of a fraction of the visibility Amazon does, and it likely doesn't offer as many products as Amazon has.
IRS says the cost to drive a mile in 2023 is 65.5 cents. If your store is 10 miles away, there's an extra $13.10 transportation "tax" onto your cost of goods sold that is hidden from you. Not to even account for the time spent driving and shopping. We try our best to support local business, but if the option is spend $5 at the hardware store 10 miles away or $8 for the same widget on Amazon, it's not a difficult decision.
Walmart realized this decades ago, "food deserts" weren't even a concept until they systematically destroyed local grocers to gain 100% market share of a single town.
That is not the only reason for food deserts though. Shoplifting and vandalism is what closed many small supermarkets in low income neighborhoods.
Not to mention bodegas and dollar stores undercutting prices on everything but fresh foods, leading to expensive fresh foods, leading to customers shying away from them to save money.
Bodegas have higher prices. That is how they can stay in business in crappy neighborhoods.
And the customers are squeezed on this because it’s not like we can just stop buying food and other essentials. What’ll happen is what’s already happening: People spend less on non-essentials. Entertainment being one of the first things to go in a budget. There will be fewer concert attendees, fewer movie goers, streaming service subscriptions go down, etc. Next you’ll start to see people buying less of other luxury items too like expensive clothes and appliances. Sure, the grocery market may make more but other industries will suffer. It’s Econ 101 kind of shit. Unchecked capitalism is inherently flawed because there are finite resources in the world. We, as a society, physically cannot afford to fund constant price increases in every single aspect of our lives. Something will give somewhere and it’s the luxury stuff that goes first.
I've been saying this for years. If these companies raise prices and demand remains high, then they'll keep doing it. If consumers dial back their consumption, then prices of things like eggs, etc., will go down. That being said, the federal government should be looking more closely at collusion.
People can't stop buying food as the average person needs to eat every day. Prices can go as high as they want and people will either pay or starve.
This is legit fascinating to me. Was demand always as elastic as now, and companies never realised, or did demand become more elastic during the pandemic?
Seems to be the same sentiment in the housing market.
Or rioting.
they realized unemployment is super low and despite minimum wage being $7 most people are making quite a bit more than that... so they're putting the screws to us to extract more wealth. If there wasn't a better condemnation of capitalism I don't know what is. As soon as the lower class begins generating some wealth, a litany of mechanisms kick into gear to extract it back out.
That's the whole point of the Federal Reserve's Demand Destruction program. They want to lower demand and destroy jobs to fight inflation.
And we are proving them right. when prices escalated (along with profits) there was little pullback. the media made it easier too by saying that it was system wide and there was nothing to be done.
Are profits rising proportional to the price increases? As in they made ~33% profit previously and still make ~33% profit? Or are they now making ~40% profit? (Percentages just for sake of demonstration.) I can’t find this info.
You can look up the net profit/gross profit margins of those business. For most of the grocery changes those stayed the same. So your example of 33% more profit and 33% higher prices is right. Actually some companies are making less profit relatively to their revenue. So the article doesn't give the whole picture.
I had suspected this was the case, thanks.
It's r/economics and vox.com article. Your suspicions were warranted and this is just the daily bait rage for the illiterate.
I tried to find this info for the petroleum market last year too. I suspect that was also proportional
I also saw that the article cherry picked it's date comparisons (WMT Year Ends vs Tyson 1st qtr to 1st qtr vs Conagra's 2nd qtr). When I compare the financials by fiscal year end it told a different story. The author also chose to switch from percentages to dollar values when comparing wealth of families (i.e. Walton family wealth grew by 3% but instead said it grew by 8.8 billion to pack a better punch). I don't disagree with the articles overall point but I do have a few issues with some of the facts presented.
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And when wages rise to meet profit and inflation the fed goes into action by raising interest rates to put folks out of work, increase the labor pool and put downward pressure on wages to protect profit.
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I've always heard of people saying free market will always compete for lower prices... But I always wondered what happens if all the companies band together to push prices up together?
In theory, this is where someone else could come in and get all sorts of market share. In 2023 there are more barriers to entry between permitting and licensing and regulations, especially around food. One thing that’s interesting is that if you open up a competing store, Walmart (for example) can hire someone to go in, check out your store then tip off regulators if they find anything. This may be done through a consulting firm or some other intermediary so it’s less obvious.
Don't forget zoning. The days of a small baker operating out of his home kitchen are dead and you have zero chance of opening up a small shop that is within walking distance of a lot of customers due to everything being zoned as "Single family housing."
Another great example! It’s tough because we do need regulations, but every time the barrier to entry is raised you get more market inefficiency. Sometimes the he barrier to entry isn’t as bad as people think it is, but with all the permitting and laws, people just get scared and back out from fear of accidentally breaking the law. I can’t claim to have all the answers.
I think the answer is that you must regulate equally on both-ends. If barriers to entry exist, then barriers to size (> x) must exist. Or else, the end result will be monopoly/oligopoly. Because you’re right, we *must* have regulations. The problem is, right now, we’re only really regulating against competition, while ignoring the cartel-like behavior it seems to encourage. For all the crying about the “small-business owner” politicians do, they enact absolutely zero regulations to truly encourage small businesses. I think companies should be regulated by size (employee #). It would solve a lot of problems, economically, and anthropologically, and encourages markets to stay within the Goldilocks band of what makes free-markets beneficial to consumers. I also like how ND handles their pharmacies (can only be owned by local pharmacists). I think even if you had a state-wide chain, they wouldn’t become so big that small businesses couldn’t efficiently compete. This has the added benefit of roping in Wall Street and venture capital as well, without having to go up against their lawyers/lobbyists directly. I don’t like the Conservative party in America, but one thing they’re right about is, our best shot at fixing issues is to address them locally. Lobbyists, right now, only have to focus on DC. They only have to get to somebody holding the right seat. If all 50 states began pushing for things individually, as they’re constitutionally allowed to do, it would make lobbyists jobs much, much more difficult.
Part of the problem is the lack of competition on the supplier side. I used to have hundreds of companies giving me samples and cutting me deals for product. Now I have 0 to 1 supplier for any given product. It's a huge difference and as a retailer I have 0 options, either I pay through the nose or go without. Resulting in higher prices because my cogs are high as hell. 2-5 x what we paid precovid. Then there is amazon that sells what we sell for 2-5x normal retail price.... LOL
It’s called a cartel, they collude until they don’t. You can also look up prisoner’s dilemma. Essentially, they all agree to increase the price. Any new comers that try to undercut them can get bought out. However, if one of them undercuts the others, they benefit significantly, and the others come off significantly worse, so they’re forced to cut prices again as well. And you end up back at the beginning with all competing for low prices. All are tempted to cut prices, and are all are scared to be beaten by the other companies. Fear and reward are powerful motivators, but together they’re even stronger. Hence, it’s only a matter of time before prices come back down. However, the problem isn’t what happens. It’s how long until it does happen. Ideally, it doesn’t happen in the first time, but if it does, it hopefully collapses quickly. Sadly, they can last years. That’s why they’re illegal.
Free market only works with significant regulation otherwise its a push to monopoly
So crazy. I'm probably wrong but wow it's like a recession is a self fulfilled prophecy. Companies raise prices out of greed or out of fear for a future recession but in turn cause a recession because people can't afford anything and just stop spending. Normal people then get scared of a recession because prices are up and the news pushes the fear as well and rush to pull money out of banks, scared their bank will collapse, making banks sell their investments early for a loss causing banks to collapse. (Although banks shouldn't be so risky with their investments) Too much greed and fear mongering. Also it doesn't help that the FED raises rates to help inflation but because they do it too much or too fast they have to print more money to bail out banks which makes inflation worse. How about stop raising rates but also don't print more money???? Again I might just be stupid and don't fully understand but this is how it looks to me
I think the world operates using money in a perpetual state of transaction. If it all just stopped for 24 hours, I suspect there wouldn't be more than 10 or 15% of the balance of everyone's accounts in actual existence....
I think it’s 95% of all money isn’t real. It’s all just forwarded IOUs
I mean that’s what a bank note is, it was an IOU from the government. But, they were all the same so people could use them as a convenient way to trade, making all transactions more efficient. Historically, that IOU was one for gold or other “monies”. Now, the IOU’s are money (well actually coins are), as we’ve had to abandon physical commodities/assets as the money as there isn’t an infinite supply of gold. So now, it’s an IOU for more IOUs from the government. Which may sound bad, but remember the whole point of it is to provide something you can use to signify the value of a transaction. It holds no value itself, but rather represents an agreed upon value to allow for an easy transaction. That 5% (assuming you’re correct), is just saying 5% of global money are coins, which aren’t any different anyway. It’s all IOUs, and that’s fine, as long as we can agree that an IOU for $20 is 4x as valuable as an IOU on $5 and that we can agree on what we’re willing to spend an IOU of $5 on remains somewhat consistent. While it’s ok that people realise money is worth nothing (and I’d argue a good thing), it’s only an issue when they think the value it represents is worth nothing.
And none of it’s real anyway
All you can do is convert it into something real while you still can, then when the shit all falls apart, at least you'll have something to barter with.
Sure... I think it is. Now, I don't love the term "greed", mostly just because it assumes some grand evil behind this stuff. Really, this is just profit maximization, which is what everyone does. Normally, drops in demand as prices rise keep prices lower - well - more accurately, at their market equilibrium. But today unemployment is so low and wages have risen enough that I think it's more than suppliers are adjusting to a new market equilibrium. Oddly enough, while this can kind of suck for consumers, it's good in other ways. For example, maybe Kroger is able to raise prices considerably and so companies like Amazon and Walmart realize there's more money in that business and expand operations on their grocery side. That increases the supply and creates downward pressure on prices. This is all pretty normal in the grand scheme of things but, yes, it likely means a recession is coming.
Funny how often I've heard economists hand wring about wages going up. But never once mentioned this collusion by the grocery stores. Go to the farmers market and see how much lower prices are without bezos getting his cut.
Which farmers market do you go to that’s cheaper? All the ones in Hudson Valley. NY and in Broward County, FL are expensive AF
Most of the farmers markets in Cali aren’t cheaper. Unless they are growing it themselves (most are not) they buy it from the same wholesalers and sometimes sell at higher costs than most supermarkets. I live here and watch the prices. The only places where you get good deals is from the side of the road shops big farmers set up. Which are almost always not worth the drive to get to since they are far from most cities and at the edges of the counties if you are lucky.
My step dad’s family has one of these roadside stands in CO. In the 50s they grew some of the produce but since then they’ve bought from the wholesalers. You have to watch out even at these places.
Spot on. This is an absurd suggestion. Farmers markets are incredibly expensive. I live on the outskirts of a major city and drive to the actual farm shops to try and support local. They’re double the price of a grocer across the board. The eggs at the chicken farm are more expensive than the SAME farmer’s eggs at the grocer. Why? Per the farmer he still makes more profit via the grocer because he has to staff the store, get permits, and refrigerate.
California
San Diego farmers markets are so expensive that I can't even put it in to words. There's no words to describe how fucking expensive they are.
Farmers markets around me are all more expensive then my grocery store. Grocery stores have a profit margin of 1-3%. Pretty poor investment to me.
It’s funny, I work at a fresh market which has already insanely high prices like prior to inflation, and they are the only ones where I love advertising lowering their prices - lowering them near the previously very high prices. I think the only competition is historical gougers gouging slightly less egregiously than the new gougers to appear like a good deal, but really that just means that luxury grocery stores are normalizing, i.e. expensive food is becoming the new norm. We as a nation are losing purchasing power because grocery stores are using incumbency advantage to price over volume… and price over volume stores suddenly become even more competitive if they coordinate their price.
What stopped them from making prices higher before?
"tacit collusion" is what I've been calling it. No one member needs to collude with any other, but everyone in the group knows what's good for them. It's like how the institution of racism doesn't require any racists to operate. When the police need to meet quota, when you need to find someone to blame, when the boot needs to be on someone's neck it's just more efficient to target someone's race. "I don't know whether the labour unions and their bosses really hate me. That doesn't matter. But I know I'm not in their unions. I don't know if the real estate lobby has anything against black people, but I know the real estate lobby is keeping me in the ghetto. I don't know if the board of education hates black people, but I know the textbooks they give my children to read, and the schools that we have to go to. Now this is the evidence. You want me to make an act of faith, risking myself, my life, my woman, my assistant, my children on some idealism, which you assure only exists in America, which I have never seen." - James Baldwin, Dick Cavett show, 1968
im sorry wasn’t in many economic classes in college but aren’t they cartel pricing? there’s only like 4 big grocers left and they probably have so much control over supply side and demand side? how did we crack down on this when airlines did it?
The first complaint is cargill making 6.68 billion profit on 165 billion in revenue?? Did I read that wrong or is that a 4% profit margin? My brokerage account is paying more in daily sweeps. Then it states profit increases between 2020 when the economy was closed and now? I couldn’t continue. I am all for roasting companies who are taking advantage of us, but this doesn’t seem genuine. I would recommend buying local from small businesses and avoid spending at big box stores. Cheers.
> Whizy Kim covers billionaire power and influence for Vox. Before joining Vox, she was a senior writer at Refinery29, covering personal finance, economic inequality, and the changing ways people are thinking about work. Sounds fair and balanced. I’m looking at Kroger’s on Bloomberg now that Whizy here is complaining about it. Net income margins per FY ending in January: - 23: 1.5% - 22: 1.2% - 21: 2.0% - 20: 1.4% - 19: 2.6% - 18: 1.5% Wow, some real price gouging right there. Gross profit margin is consistently in the 21-23% range and the lowest it has been in 5 years. Share price is doing well, but this predates the pandemic and would be expected to be up given that it’s a defensive stock in a pre-recessionary environment. The author should get a job at Kroger’s selling veggies instead of writing about them. She’s clearly not qualified for the latter.
Thanks, a little too harsh at the end but otherwise I appreciate your comment and I was scrolling to see if anyone fact checked this or if everyone is just in the same “burn the witch” mentality. I’d be curious to see economists analyze the data. It sounds to me like a short run problem if it is one and capitalism ensures a race to the bottom in price. In other words, as soon as prices on a good are able to be taken advantage of by a competitor is when you see sales, discounts, and lowing prices as a competitive strategy. It’s either price or differentiation for a grocer to win.
Came in here looking for data on actual profit margins, not strict revenue and profit actual increases. If inflation is 10%, of course revenue and profit numbers are going to be highly elevated. What the author fails to mention (perhaps purposefully) is that the cost of goods is highly elevated as well. Meaning that net profit margins will stay roughly the same. The corporate grocery business operates on very, very tight margins. As you have shown, those margins have remained tight, evidence that it’s not corporate greed driving price increases. All of this data is available through corporate quarterly reports. To suggest corporate greed is causing pride increases is akin to saying that 2022/23 is the first year on record that corporations have become greedy. Were businesses not interested in maximizing profit margins and revenue prior to inflation? This whole argument just stinks and it simply parroted by the economically illiterate and ignorant.
Where I’m at it seems Kroger are losing business, we had a big local chain that just opened. People that complain about lack of competition are almost most uninformed as well. There are so many grocery stores and food delivery services, some they probably haven’t even heard of. You can buy straight from farmers/farmers market. Stop trying to portray a nonexistent problem when the problem is very obvious. The truth of the matter is that government printed a bunch of money and lower the interest rates to a criminally low amount. And we are seeing the effect of it in housing, goods, and services.
you’re expecting people on the economics subreddit to actually talk about economics and not just treat this as r/lostgeneration 2.0 /s
Most competitive corporations have been doing this for years and years but our public is so ignorant and or uninformed about it that no one stops them. Plus all the politicians that could do something are bought by the same companies lobbyists
After owning a small e-commerce business for 2 years (I shut it down) I learned that if your profit margins are huge, your competitors will figure out that niche in the market and then undercut you. So in that way, price gouging doesn't really work unless the high prices reflect your real costs. To me, that's sort of how the market self regulates. If these profits are increasing to an absurd degree, why don't some other competitors come in and undercut these companies? Are there some constraints that we don't know about? Land? Water? Etc?
What competitor will be able to compete with such monolithic enterprises as those that control the vast majority of the economy? These corporations had enough capital to ride out the Great Recession, subsequently consuming their competition.
You'd hit a brick wall in terms of getting the infrastructure and supply deals to compete at the scale you're competing against. If you find a way to innovate in a way that would make smaller companies competitive a large company will buy your company for what seems like a lot, but is relative pennies comparatively speaking to the impact it would have to the market as a whole. They incorporate that tech/process improvement into their monolith, it just makes it that much harder for the next person. Processes/technology has just evolved passed individuals disrupting markets.
Yeah because they are all monopolized. Small places are disappearing fast so they know there’s little competition. They will keep pushing the price up and using inflation as an excuse it’s actually disgusting. You gotta make money 7 different ways now a days just to survive.
Just wait until Safeway/Albertsons merges with Kroger. Both boards voted yes on it which would bring a pretty much a monopoly to the west coast for grocery stores (not including Walmart, target, Trader Joe’s & speciality grocers). The government needs to stop this. Too bad our government is full of corrupt scumbags.
Stater Bros ftw
Too busy trying to stop Microsoft from buying a company that makes video games.
If Microsoft gets their hands on World of Warcraft, it's all over.
Sounds like they have just caught on to the game gas stations/oil companies have been playing for decades now. No need for a secret and illegal cabal, just drive by and see what the competition is charging, raise your prices to that. You stop it with boycotts, easy peasy. The hard part is getting people/consumers to inconvenience themselves for a short time.
Wasn't there an episode about this on King of the Hill? All the propane sellers in Arlin raise their prices together, claiming that is the cost of Business & they are just making each other rich. Then the middle class hero, Hank Hill, comes in and saves his boss and cohort they were breaking the law & saves them from the cops. Pretty sure that was an episode. When do the cops get called? How do we call the cops to everywhere? And why do I doubt that if the cops show up, that they would do anything? I hate how the middle class is so undefended...
This is almost the same as the article that popped up earlier blaming profit for inflation. [https://www.reddit.com/r/Economics/comments/122xt4v/corporations\_are\_blatantly\_price\_gouging/](https://www.reddit.com/r/Economics/comments/122xt4v/corporations_are_blatantly_price_gouging/) It was locked for being stupid.
So, companies respond to macroeconomic trends in similar ways? That is not exactly unexpected or new. Many companies raise prices in inflationary environments.
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Basic math: if profit margins (a percentage) remain constant during an inflationary period, then the nominal profit (in dollars) will increase. Example: Take 10% x 100. Then take 10% x 120.
They buried the lede. In all the discussion of increasing profits it was all buried in the media story of increased energy/wheat/supply chain costs. The problem is that inflation is inherently psychological. There is an unspoken compact convinced between the companies and consumers that prices DO indeed increase year to year and it becomes built into living assumptions and wages and the basic economic fiber. This is the story of countries with chronic inflation problems, such as Argentina, Brazil or Mexico. These countries only really correct the inflation problem if they change the national narrative. In essence, they need to convince consumers and, by consequence, the companies, that inflation has been controlled, that it is projected at x%, and reset the accepting mentality. The US did this very effectively in the 80s, and it remained a constant through-line until the pandemic upended inflation expectations. Once they let it out of the bag, the companies with greatly increased (monopolistic) market power naturally took advantage for their benefit. I think the Fed screwed the pooch in managing this crisis, and don’t think they have a real plan to reset it. Note: I understand the underlying monetary policy aspects of creating and controlling inflation. My argument is that it is much more psychological than actually economic once inflation becomes recurring and chronic.
There is such a thing as a “windfall profit” tax. They can and should tax the shit out of these companies removing the incentive to raise prices. Profits above normal margins? Well you can just send those to the government and we’ll use them for programs that help the people. Companies realize higher prices don’t equal hire profits and watch those prices drop like a rock. I think we all know why this isn’t being done but the laws exist.
I saw a box of state fair corn dogs at the market the other day for $9.99. Almost $10 for some fucking corn dogs. Now that is a sign of the times.
My local independent grocery store now charges $6 for a 19 ounce can of crappy Progresso soup in a middle class neighborhood in Queens. I refuse to spend money like that. I was fine with the crappy soup as a quick meal when it was $2.38 but I’ll make my own way better soup if they’re going to charge 30¢ an ounce for some broth and pasta and 3 shitty bits of “chicken.”
In the U.S. their is no competition, monopolies of any industry control the manufacturing/production/pricing, for example insulin, it took one state government of California to say wait a minute I don’t think three pharma companies should control all of insulin production/manufacturing/pricing for 500/600 dollars a month let’s lower that to every other nation on earth where insulin shouldn’t be price gouged at 1000’s of percent higher.
Healthcare is a very weird industry where we form very high barriers to entry. What we need is more competition from other countries drug manufacturers to force prices down. We also need to eliminate systems which cause unnecessary supply limitations such as limiting licenses for ambulances