While inflation is a main driver of high food prices, there’s another factor at play—large profit margins that are hard to resist.
Key Details
- As inflation continues to rise, prices at the grocery store are noticeably higher, but that might not be totally due to inflation.
- Prices for food eaten at home have increased 13%.
- When food and beverage companies announced quarterly revenue last month, many reported an increase in profits.
- Prices had to go up to cover the costs of inflation, but some businesses may have continued hiking rates in order to create a wider profit margin.
Why it’s news
Food is growing more expensive, putting pressure on American pocketbooks. In large part, these added expenses are due to inflation raising the prices of food and utilities, but companies aren’t immune from taking advantage of the expectation for higher prices.
PepsiCo reported that its third-quarter profit increased more than 20% while its product prices increased 17%. Coca-Cola reported a 14% profit increase. Restaurant Chipotle Mexican Grill is set to have a 15% price increase on its products. So far, its profit is 26% higher than last year.
As prices on raw materials grew over the last year, companies had to increase prices to cover sudden new expenses. Critics argue that the companies are raising prices beyond what is needed to cover new costs and attempting to make a larger profit.
The recent earnings reports confirmed that belief for many critics.
“The recent earnings calls have only reinforced the familiar and unwelcome theme that corporations did not need to raise their prices so high on struggling families. The calls tell us corporations have used inflation, the pandemic and supply chain challenges as an excuse to exaggerate their own costs and then nickel and dime consumers,” says president of advocacy group Accountable.US Kyle Herrig.
Those higher prices may be starting to catch up to companies, however. More consumers are changing their habits when it comes to grocery shopping. Some are getting creative by shopping at multiple stores, others are cutting items from their list permanently.