Chocolate pricing

Are grocers profiting from inflation? – RetailWire

August 04, 2022

In a tweet on Tuesday, Gail Vaz-Oxlade, a Canadian celebrity money specialist, called for a boycott of Loblaws, encouraging subscribers to “join sending a message to the Loblaws group that you do NOT appreciate their profit and call it ‘inflation’.”

While record oil company profits have been branded as profiteering, grocers and food manufacturers, especially major meat and poultry suppliers, have heard similar accusations amid runaway food inflation around the world. Many are reporting record or at least robust profits amid pricing actions.

In June, food inflation in the United States was on the rise 10.4 percentage year over year, the largest increase since February 1981. Grockery food price inflation rose 12.2%.

Alleged price gouging by grocers has recently been a trend in Canada after a Toronto Star The survey found that Canada’s three largest grocers — Loblaws, Sobeys and Metro — were increasing their profit margins, suggesting that price increases are passing through at a faster rate than cost increases.

Grocers attributed the margin gains to operational efficiencies, cost reductions and changing shopping habits, such as increased drugstore sales. However, several economists were quoted as saying they believe grocers’ margins have benefited too much from the price actions.

“What is often underestimated is the profit pricing spiral whereby firms realize that consumers are willing to pay higher prices, and they raise prices not just to pass on their own costs, but also to take an extra slice,” David Macdonald, senior economist at the Canadian Center for Policy Alternatives, told the Star.

Hal Singer, managing director of Econ One Research and adjunct professor at Georgetown University’s McDonough School of Business, recently said The hill that earnings calls are a method companies use to signal and coordinate price increases without overtly violating antitrust laws. He said: “A surge in inflation creates an opportunity that did not exist before for firms in concentrated industries to better coordinate their pricing decisions.”

Inflation and alleged profits promise to become a hot topic around November’s midterm elections. Massachusetts Senator Elizabeth Warren tweeted earlier this year: “Giant corporations are making record profits by raising prices, and CEOs are saying the quiet part out loud: They’re happy to help spur inflation.

DISCUSSION QUESTIONS: How would you define profit in the current inflationary climate and are some grocers and food manufacturers to blame? Do you see a potential backlash or need for better messaging around pricing actions?

Braintrust

“No backlash expected, but don’t be a leader in price increases.”

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