Large players in the grocery industry took advantage of the pandemic’s supply chain problems to raise prices and profits and keep them high.
So said the Federal Trade Commission (FTC) in a press release and staff report issued Thursday (March 21).
“As the pandemic illustrated, a major shock to the supply chain can have cascading effects on consumers, including the prices they pay for groceries,” FTC Chair Lina M. Khan said in the release. “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.”
Some larger firms were able to protect their product supply at a time when smaller firms faced greater difficulties obtaining products during the supply chain disruptions, according to the release.
During the pandemic, large purchasers sought favorable allocations from suppliers, threatening fines and otherwise pressuring suppliers to favor them over their rivals, the release said.
In addition, manufacturers reduced their promotional spending on items that were in short supply. This change led to higher prices for retailers that relied on this spending to offer lower prices, per the release.
Food and beverage retailer profits rose in 2021 and remain elevated, “casting doubt on the assertions of some companies that rising prices at the grocery store are the result of retailers’ own rising costs,” the press release said.
Retailers sought to diversify their supplier base during the pandemic, and some began to consider building or acquiring manufacturing capacity. Excessive consolidation could leave other buyers — especially the retailers’ smaller competitors — at a disadvantage, per the release.
“Taken together, the report’s findings reveal how supply chain bottlenecks can leave markets exposed to major supply chain shocks — and that those shocks, in turn, can allow major firms to entrench their dominance,” the press release said.
In another recent move in the grocery industry, the FTC said in February that it issued an administrative complaint and sanctioned legal action in federal court to prevent Kroger’s acquisition of Albertsons. The agency said that such a merger would likely lead to increased prices for consumers and diminished wages for workers.