High Food Prices In CA, Across Nation, Called Into Question By Feds

CALIFORNIA — Ongoing high food prices at grocery stores were called into question Thursday by federal officials who said that even though pandemic-related supply chain pressures have eased, consumers are still paying more at checkout stands.

A March 21 U.S. Federal Trade Commission report recommends policymakers investigate grocer and food-retailer profits, which shot up as Americans grappled with COVID shutdowns and have remained high since, according to the report.

“Some firms seem to have used rising costs as an opportunity to further hike prices to increase their profits, and profits remain elevated even as supply chain pressures have eased,” the report reads.

The report singled out major grocery chains with soaring profits as the nation suffered the worst of the pandemic-related supply chain crisis.

Kroger, the country’s largest supermarket chain, "reported $148 billion in sales and an operating profit of over $4 billion," the F.T.C. concluded.

Walmart, the nation’s largest mass-merchandise retailer, reported sales "just short of $400 billion in 2022, earning the company an operating profit of $21 billion," according to the F.T.C. findings.

Furthermore, the report found that big players in the grocery and food retail segment hurt their smaller counterparts, and gained a competitive advantage amid the pandemic — an advantage that continues today.

For example, Walmart "tightened the delivery requirements its suppliers had to meet to avoid fines as the pandemic went on," the report reads.

The tactic affected competition between companies that threatened fines and those that did not — or could not.

"The potential for powerful retailers to distort product allocations during a shortage suggests that crises may create an opportunity for some firms to entrench their market power," according to the report.

Patch reached out to Walmart and Kroger for comment but did not immediately receive a response.

The much-anticipated release of the F.T.C. report comes as the agency cracks down on large grocery and food retailers. Last month, the federal agency and several state attorneys general — including California's — sued to block Kroger from completing its $25 billion acquisition of Albertsons.

The F.T.C. and the states argue the deal would weaken competition and likely lead to consumers paying even more for food.

"This merger will leave Californians with limited choices over where to shop — and for workers in this industry, where to work. As many families continue to feel the burden of inflation, fighting corporate consolidation that threatens to increase prices and reduce service is more important than ever," California Attorney General Rob Bonta said.

In response, Albertsons said blocking the merger would give mega-retailers like Amazon and Walmart an advantage in the grocery industry. Kroger claimed the merger benefits consumers and workers. Read more: Grocery Store Mega-Merger Will Drive CA Food Prices Up: Feds

In recent weeks, President Joe Biden has accused grocery chains of overcharging consumers and earning excess profits. Overall food prices surged in 2022 and have not fallen.

Thursday's F.T.C. report found "grocery retailer profits rose and remain elevated, warranting further consideration by the Commission and policymakers."

"Specifically, food and beverage retailer revenues increased to more than 6 percent over total costs in 2021, higher than their most recent peak, in 2015, of 5.6 percent," the report found. "In the first three-quarters of 2023, retailer profits rose even more, with revenue reaching 7 percent over total costs. This casts doubt on assertions that rising prices at the grocery store are simply moving in lockstep with retailers’ own rising costs. These elevated profit levels warrant further inquiry by the Commission and policymakers."

Thursday's report comes after the F.T.C. ordered several companies in late 2021 to turn over “detailed information” to help shed light on the causes behind supply chain snarls and how business practices could have worsened disruptions.