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Big grocery retailers took advantage of supply chain disruptions to outmaneuver smaller rivals and protect profits during the pandemic, according to a report released Thursday by the U.S. Federal Trade Commission.
The report found that some large companies are “accelerating and distorting” the effects of supply chain grunts, including by pressuring suppliers to favor them over competitors. Food and beverage retailers also made high profits at the height of the pandemic and continue to do so today, with rising food prices simply keeping pace with rising costs for retailers themselves. The authors argued that this casts doubt on the claim that only
The report said: “Some companies appear to be using rising costs as an opportunity to raise prices further to boost profits, with profits still rising despite easing supply chain pressures. “It has said.
The report’s release comes as the FTC cracks down on major grocery retailers. The commission and several state attorneys general filed a lawsuit last month seeking to block Kroger from completing its $25 billion acquisition of the Albertsons grocery chain. They argued that the agreement would likely reduce competition and result in consumers paying higher costs.
The independent federal agency’s actions help strengthen the Biden administration’s efforts to combat rising prices. President Biden has taken a tougher stance on grocery chains in recent weeks, accusing them of overcharging shoppers and making excess profits. Although the rate of increase in food prices is currently slowing, it is expected to rise sharply in 2022, and overall will not fall. As a result, high food prices continue to burden many consumers and become a political problem for the government.
Biden has also sought to address the issue by focusing on food companies and condemning a practice commonly referred to as “shrinkflation,” which reduces the package size and portion sizes of some products without lowering prices. . Biden renewed his call for snack companies to end the practice in his State of the Union address earlier this month.
The FTC concluded in its report that supply chain disruptions do not equally impact companies across the grocery industry. Compared to large companies, small grocery retailers faced more difficulties obtaining goods during the pandemic.
“The FTC’s report examining the U.S. grocery supply chain shows that powerful companies are using this moment to exploit their competitors and the communities they serve at the expense of their competitors and the communities they serve,” FTC Chair Lina Khan said in a statement. It turned out that we had an advantage.”
The report will help regulators uncover the causes behind supply chain disruptions and how business practices may have exacerbated the disruptions to multiple companies in late 2021. The announcement was made after an order to submit information.
According to the report, large companies pressure suppliers to obtain scarce products by imposing strict delivery requirements and threatening large fines if orders are not met. It turned out that it was. According to the report, these measures helped large retailers increase their inventory of goods and effectively contributed to gaining a competitive advantage over smaller competitors.
“In some cases, suppliers have prioritized product allocation by threatening buyers with fines,” the report said.
However, the report said some suppliers already had contractual requirements in place, so retailers did not have “unfettered freedom” to impose these penalties.
FTC officials also argued that consumers are still “facing the negative effects of price increases due to the pandemic,” given that retailers’ profits are still rising.
Using publicly available data on grocery retail industry profits, the FTC found that in the first three quarters of 2023, food and beverage retailers’ revenues amounted to 7% of their total costs. This is up from more than 6% in 2021 and the most recent peak of 5.6% in 2015.
“These increased levels of benefits warrant further investigation by the Commission and policymakers,” the report says.
Following the outbreak of the pandemic, the country’s food supply chain suffered significant disruption. Households rapidly moved away from restaurant dining, and panicked shoppers stocked up on food, increasing demand for groceries. Labor supply has tightened at grocery stores, warehouses and meat processing plants as workers contract the coronavirus. Truck drivers were in short supply even before the pandemic and couldn’t make deliveries fast enough. These factors combined to create massive product shortages and soaring food prices.
Food prices rose even more significantly in the second half of 2021. As supply chain disruptions and labor shortages have increased transportation and raw material costs, companies have passed on increased costs for many products to consumers. In August 2022, food inflation reached a peak of 11.4%. Since then, food price increases have continued to slow. Food prices rose 2.2% in March.
Companies across the industry plan small price increases this year, in part as some consumers begin to cut back on spending, leading some companies to see lower sales. states that they are doing so.
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