Giant Food Producers Profiteering Off Inflation And Saying It

Sen. Elizabeth Warren, D-Mass., on Tuesday accused corporate executives of using inflation as a cover to jack up the cost of meat, vegetables, and cleaning products and rake in record profits.

Photo Insert: Senator Elizabeth Warren alleges that giant food corporations of exploiting inflation to jack up prices.

"Giant corporations are making record profits by increasing prices, and CEOs are saying the quiet part out loud: they're happy to help drive inflation," Warren tweeted on Monday, Jon Skolnik reported for Salon.

This profiteering is finally receiving scrutiny from the Biden administration. In a blog post from December, the White House said meat processors' profits were too high to justify their claim that price increases are the result of supply chain issues, noting that gross profit margins are up 50%.

"If rising input costs were driving rising meat prices, those profit margins would be roughly flat, because higher prices would be offset by the higher costs," the National Economic Council wrote. "Instead, we're seeing the dominant meat processors use their market power to extract bigger and bigger profit margins for themselves."

Lindsay Owens, executive director at Groundwork, a progressive economic think tank, wrote on Twitter last week that "if you want to understand the role of corporate greed in price hikes & inflation in America today, you don't have to take the word of watchdogs or critics of corporations. CEOs are admitting it themselves in plain daylight," she said. "And they're betting they can get away with it.

In September, the US Department of Agriculture threatened to crack down on "pandemic profiteering" by enforcing antitrust laws, improving transparency in labeling, creating a fund of $1.4 billion to help independent meat processing companies and related businesses. It said it would continue a joint investigation with the Justice Department into the chicken processing industry.

This month, beef giant JBS was forced to pay $52.5 million to settle a price-fixing lawsuit, according to CBS News. The plaintiffs' attorney, Dan Gustafson, said the settlement could be an "icebreaker" that might prompt similar cases against other big meat producers, including Tyson, Cargill, and National Beef.

Last year, the consumer price index saw a 7% increase, the largest 12-month gain since 1982. Inflationary pressures have had a particular impact on the prices of meat, poultry, fish, and eggs, which increased by 12.5% in 2021, according to the Bureau of Labor Statistics.

Executives of major grocery chains, meat producers, and household products makers openly crow about the phenomenon, largely because it has created higher profit margins.

Rodney McMullen, CEO of the supermarket retailer Kroger, said the company "operates best when inflation is about 3% to 4%," adding that "a little bit of inflation is always good in our business," according to CNN. "Businesses like ours have done well when in periods where the inflation was 3% to 4%," Albertsons CEO Vivek Sankaran added.

Last week, the CEO of Tyson, the nation's second largest processor of chicken, beef, and pork products, attributed price increases to rising manufacturing costs and materials shortages. "We're not asking customers or the consumer ultimately to pay for our inefficiencies. We're asking them to pay for inflation."

During the final quarter of 2021, Tyson's average price of beef rose by roughly 31% and its share price shot up by 11% after it reported profits that doubled in the first quarter of 2022, according to Reuters.

Last month, Procter & Gamble — which manufactures or distributes a wide range of cleaning and hygiene items as well as food, snacks, and beverages — said on Wednesday that the company expects profits to increase into 2022, even as the cost of labor, freight, and raw materials continues to rise, according to The Wall Street Journal.

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