As the pandemic wore on and supply chains started to become more strained, the nation's largest grocery store chains raised prices and became more profitable, a new report from the Federal Trade Commission suggests.
The FTC says that profits surged at the United States' largest chains even though Americans were dealing with soaring food costs and fewer choices. The FTC's report says the supermarket chains "used rising costs as an opportunity to further raise prices to increase their profits, which remain elevated today."
“As the pandemic illustrated, a major shock to the supply chain can have cascading effects on consumers, including the prices they pay for groceries,” said FTC Chair Lina M. Khan. “The FTC’s report examining U.S. grocery supply chains finds that dominant firms used this moment to come out ahead at the expense of their competitors and the communities they serve.”
The FTC noted that revenues increased to more than 6% over total costs in 2021 for major grocery chains. According to the consumer price index, food purchased for in-home consumption increased 7.4% in 2021. Food prices jumped again by 11% in 2022.
From January 2021 through the end of 2022, food prices rose over 19.4%.
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The report specifically called out profits made by Kroger, Walmart and Amazon. It also drew attention to the profits earned by several large wholesalers.
"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 says. "Larger retailers and wholesalers with considerable leverage over their suppliers were able to take more aggressive action to protect themselves than were their smaller rivals."
The report also suggested the smaller chains and independent stores struggled to stock shelves while supply chain shortages less impacted major chains.
The National Grocer Association, a trade association consisting of independent grocery stores, called on Congress to take action to "level the playing field" between independent stores and big chains.
“The report supports the National Grocers Association’s longstanding assertion that consolidation and buyer power in the grocery sector lead to discriminatory practices against independent grocers, resulting in elevated prices and diminished choices for consumers. Notably, the report reveals how major national grocers capitalized on supply chain disruptions during the pandemic to solidify their market dominance to the detriment of competition and consumer welfare. These findings necessitate further investigation and consideration of legislative remedies to foster a fairer marketplace in the U.S. supermarket sector,” wrote Chris Jones, NGA chief government relations officer and counsel.
The report's release comes as the federal government is fighting a merger between Kroger and Albertson's. The two large chains say the merger will create a more efficient business operation, allowing them to pass savings along to consumers. The FTC has countered by saying that less competition will lead to higher prices.
Scripps News has sought Kroger's reaction to the FTC's report.
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