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November 7, 2022

If you’ve been grocery shopping lately, you’ve probably noticed markedly higher prices on items like bread, milk, and eggs. It’s been widely reported that inflation has driven up prices, and the Bureau of Labor Statistics’ food index, a measure of price changes in grocery stores and restaurants, increased 11.2% year over year last month.

But a new New York Times report says some food companies may be raising prices higher than inflation calls for—just because they can. “Corporations have used inflation, the pandemic, and supply chain challenges as an excuse to exaggerate their own costs and then nickel-and-dime consumers,” Kyle Herrig, president of watchdog organization, alleged to the Times.

Facing erratic food costs, staffing shortages, and evolving safety regulations in recent years, grocery stores and restaurants saw very real rising costs, which they passed on to their consumers. Now some food companies have been able to cover their inflation-based costs and continue to raise prices. Jason English, an analyst at Goldman Sachs, noted on a call with other analysts this summer that Conagra Brands, owner of brands like Slim Jim and Duncan Hines, has both priced its products above inflation rates and recovered its profit margins. Chipotle has increased prices twice this year, while taking in approximately 13% more revenue year over year. (Conagra and Chipotle did not respond to the Times‘s request for comment.) Grocery prices across the country have skyrocketed 13% over the past 12 months, according to the Bureau of Labor Statistics, exceeding the national rate of inflation at 8.2% as of September.

Certainly, consumers feeling the squeeze in their wallet are switching to cheaper options where they can. But many people seem to have begrudgingly accepted the price hikes, allowing the companies to continue to make record profits. According to the Times piece, James Quincey, Coca-Cola’s CEO, said on a call with investors that sales were strong, even during these tough financial times. “In the face of these pressures, consumers stayed resilient.” Rick Cardenas, CEO of Darden Restaurants, the company behind Olive Garden and Cheddar, said on a call with analysts, “We are seeing strength with guests in higher income households.”

It seems as if these price hikes may increase until executives finally find consumers’ breaking point. But when it comes to necessities like food, where exactly is that breaking point? As Sharon Zackfia, group head of consumer research at investment bank William Blair and company told the New York Times, “In the long arc of history, most restaurants do not lower prices.” Alas, it seems in the tug of war between Big Food and the regular joe trying to treat himself with extra guac, joe loses out. Until executives across the food industry have a change of heart, I suppose I’ll see you at the farmers market.

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