President Biden, whose approval ratings have suffered due to high inflation, is beginning to pressure major grocery chains to reduce food prices for American consumers, accusing the stores of harvesting excess profits and ripping off buyers.
“There are still too many companies in America gouging people: price gouging, unnecessary fees, greed, shrinking inflation,” Mr. Biden said. last week in South Carolina. Our staff said the comments are a taste of increased pressure on grocery chains and other companies that are maintaining higher-than-usual profit margins after a period of rapid price growth.
Mr. Biden’s public offensive reflects the political reality that even as inflation moderates, voters are angry about the prices they pay at the grocery store, which is weighing on Mr. Biden’s approval rating. .Biden ahead of the 2024 election.
Economic research suggests the cost of eggs, milk and other staples — which consumers buy far more frequently than big-ticket items like furniture or electronics — plays an outsized role in Americans’ perception of inflation . Those prices jumped more than 11% in 2022 and 5% last year, amid a post-pandemic inflation surge that was the nation’s fastest price rise in four decades.
The rate of increase is slowing rapidly: in December, prices for food consumed at home increased by just over 1 percent, according to the Ministry of Labor. But administration officials say Mr. Biden is keenly aware that prices remain too high for many families, even though essential goods, like gasoline and home furnishings, are now cheaper than they were. were not at their post-pandemic peak.
And yet administration officials and their allies are generally convinced that there is little else Mr. Biden could do unilaterally to quickly bring down food prices.
“It’s difficult to understand what the short-term policy response to this situation will be,” said Bharat Ramamurti, a former economic aide to Mr. Biden and author of a report on food price inflation that will be released Friday by the progressive Groundwork Collaborative in Washington.
“When something is due in part to supply disruptions, what can you actually do to put downward pressure on prices? he said.
The Federal Trade Commission is currently reviewing — and expected to block — a merger between two major grocery chains, Kroger and Albertsons. Opponents of the deal say it would reduce competition and allow the combined company to charge buyers higher prices. But blocking this agreement would not help remedy the current rise in prices.
A Kroger executive on Thursday welcomed Mr. Biden’s increased focus on grocers’ profits, insisting the merger would lower costs for customers.
“We agree with President Biden: Too many grocers in America have increased their margins unlike Kroger, who consistently reduced our margins for nearly 20 years to save their customers billions,” said Keith Dailey , Vice President of Corporate Affairs and Chief Sustainability Officer of Kroger Group. officer. “Through our merger with Albertsons, Kroger will lower prices for even more American consumers.”
A new analysis from the White House Council of Economic Advisers suggests that high profit margins at large grocery retailers may be contributing to the stubbornly high price of food on store shelves. The analysis, which draws on data from census quarterly financial reports, found that food and beverage stores increased their margins by about 2 percentage points since the day before the pandemic, reaching their most high level for two decades.
Much of this increase occurred in 2021 and 2022, around the time other retailers — like clothing and sporting goods stores — also saw their profit margins increase. Grocery store margins have remained high, according to the analysis, even as other retailers’ margins have fallen back to more normal levels based on recent history.
“President Biden has made clear that as input prices fall, businesses should pass those savings on to consumers,” White House spokesman Michael Kikukawa said this week.
Mr. Biden made a similar point last fall in a post on the social media platform
But the White House analysis also implies that rising grocery store profit margins fall far short of explaining the price spikes that food shoppers have experienced during Mr. Biden’s tenure.
Other research suggests that additional forces – like consumer demand and supply chain disruptions – are a much bigger factor in driving up prices. A bird flu crisis caused Egg prices will skyrocket last year, for example. And food producers, like soft drink makers, have continued to raise prices even as their costs have fallen, generating dizzying profit margins.
Researchers at the Federal Reserve Bank of Kansas City found last year that strong job growth in the U.S. economy and wage gains associated with a tight labor market have been major contributors to rising food prices. Processed foods, like candy bars, account for three-quarters of recent food price increases, researchers found.
According to them, the tight labor market led to increased costs of production and distribution of these foods, “which were passed on to consumers”.
Mr. Biden’s administration has made several efforts to ease pressures on food prices, particularly on the supply side. The Agriculture Department has spent hundreds of millions of dollars to help companies expand in the meat processing sector, which is dominated by a handful of big players.
The department also changed its calculations for federal food assistance benefits and adjusted them for inflation, increasing the value of food stamps for many low-income Americans. Mr. Ramamurti and his co-authors, Elizabeth Pancotti and Clara Wilson, estimate that these increases have more than offset the increased cost of groceries for 40 million families in recent years.
In an interview, Ms. Pancotti said the consumers who suffered most from high food prices were those who made just enough money to not qualify for the food stamp program, known as SNAP.
“There is a large portion of the middle population who are low-income, but not poor enough to qualify for SNAP benefits, and who are paying 25 percent more” for groceries, she said. “At the end of the day, it’s just not reaching enough people.” »
The commission is also considering enforcement action under a nearly 90-year-old law, the Robinson-Patman Act, which requires suppliers of retail products to offer the same terms to all retailers to whom they sell. Supporters of these enforcement measures say they would lower prices at small grocers, ensuring they can purchase items at the same price as large retailers.
Politically, however, big grocery stores are the most attractive target for Mr. Biden. His aides are discussing how he could increase pressure on major chains in the weeks and months to come.
“Americans, we are tired of being played for fools,” the president said in South Carolina. “And that’s why we’re going to keep these guys – keep them and bring the prices down.”