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Demand for food is inelastic, so it makes sense that companies are raising prices as high as possible since people still have to eat. Generally this leads to pr
by boc 4y ago
Demand for food is inelastic, so it makes sense that companies are raising prices as high as possible since people still have to eat. Generally this leads to price competition from other food brands, but when single companies own dozens/hundreds of food brands it’s easy to act like a cartel and keep prices high.
- packetlost 4y agoIf there is anything that drives antitrust action, I imagine it would be food supply.
- killjoywashere 4y agoHistorically, food supply doesn't drive anti-trust. It drives revolutions in the street.
- hef19898 4y agoThe Arab Spring started over them as well
- baremetal 4y agoIn 1906, Alfred Henry Lewis stated, “There are only nine meals between mankind and anarchy.”
- Arrath 4y agoShould deliveries stop, the stocks inside modern superstores might hold out a bit longer than 9 meals, but not much longer.
- packetlost 4y agoRight, but a government worried about that might be inclined to be less friendly to monopolies.
- killjoywashere 4y agoThe rather deliberative legislative process may not have enough time to react
- hkt 4y agoI suspect the government will use it to drive down standards and unilaterally accept US imports tariff-free, rather than taking on domestic suppliers.
- fauxpause_ 4y agoThat’s an interesting point. Especially when the mega food corps are particularly concentrated on the cheaper foods.
- bombcar 4y agoNormally you see substitutions, but prices are up across the board. In fact, local eggs are now cheaper than factory farm eggs around here, and chicken is getting to be equivalent in price to beef.
- bbayles 4y agoLet's check this empirically. Which cartel-like brands are publicly traded and publish financial reports? We can look at their profit margins next quarter.
- yourusername 4y agoUnilever's net profit over 2022 increased by 24.9%
- bialpio 4y agoIt's probably better to look at the margin, I could see how the profits increased in absolute numbers as people may have switched from eating out to home-cooked food.
- apetresc 4y agoDo restaurants get their groceries from completely different supply chains than the rest of us? Sure, the distributors are different, but I'd assume it's all still Monsanto, Unilever, etc., at the end of the day anyway.
- bialpio 4y agoI don't know, but I would not be too surprised if local / smaller producers are a bit better represented for restaurants. In any case, profit margin should not be sensitive to this.
- yourusername 4y agoProfit margin increased by 230 base points that represents a 14% higher margin. 130 basepoints if you use GAAP measures so only ~7% higher margin then but clearly unilever doesn't just have higher costs but is also increasing their margin.
- bombcar 4y agoMargin will also help discount issues resulting from Covid; a company that lost money during Covid (think restaurant suppliers) would go to a profit when it was over, but are they making MORE margin (percentage) than they were before Covid?
- meerita 4y agoIf it owns all brands and they raise the price, then start your own food company offering lower prices, you will turn up the market to you like from day to nite.
- guerrilla 4y agoIs this supposed to be ironic or do you just not know how high the costs to entry are? How would you beat their economies of scale?
- simonh 4y agoIf wholesale food costs have gone up and they're simply passing that on then they may not be making any more money. Here's wholesale food prices in the US: https://fred.stlouisfed.org/series/WPU578101 https://fred.stlouisfed.org/series/WPU578101 In fact you'd expect reduced sales from the higher prices to put pressure on profits. That is what seems to be happening in the UK: https://www.grocerygazette.co.uk/2023/01/31/food-companies-profit-warnings/ https://www.grocerygazette.co.uk/2023/01/31/food-companies-p... But not in the US, where it does look like there may be some gouging going on, but we'd need to see their profit reporting to be sure: https://accountable.us/wp-content/uploads/2023/02/2023-02-10-Updated-Research-on-Food-Industry-Profits-FINAL-1.pdf https://accountable.us/wp-content/uploads/2023/02/2023-02-10...
- titzer 4y agoIt's both increased wholesale food costs and price gouging. Profits have never been higher all along the board. Everyone in the chain is "passing the cost on" and also taking a little extra cut.
- simonh 4y agoI updated my post, it does look like that's happening in the US market.
- Tyrek 4y agogouging is an incredibly unhelpful context in a macroeconomic sense. In cases of shorter term scarcity (e.g. toilet paper during early covid), you can have instances of gouging. But over a longer-term period where prices are calibrating to demand/supply dynamics, price increases simply reflect the shifting balance between supply and demand. Should we be concerned about why there are shifts in demand/supply? Sure.(In the case of food, part of this is driven by the UA war and likely other trends in food productive)? But it is eminently unhelpful to simply attribute increases to 'gouging' and expect that to be the final say.
- magicalist 4y ago[flagged]
- dboreham 4y agoAlso many people don't pay attention to how much food costs, at the point of purchase. It's all things that have low numbers that add up. e.g. when asked, nobody knows the price of a pint of milk.
- bluefirebrand 4y agoI guarantee you that people trying to raise a family on a budget pay very close attention to the cost of individual items. People might stop caring quite as much about individual pricing once they have enough money not to have to care. People who have to worry "can I afford all of this once I get to the till" are very aware of how much everything costs, and they are more common than people who don't have to worry.
- hattmall 4y agoA pint? I mean no, but that's because milk is sold by the gallon. If you think people aren't acutely aware of the price of a gallon of milk then you live in a bubble of wealthy people. If milk rises above $3 a gallon or falls below $1.50 half of my Facebook feed has something to say about it. Same goes for many other standard products.
- pjc50 4y agoThis thread title starts with "UK:", where milk is sold in pence per liter (and also "metric pints", which are pint-multiple containers quoted in mililiters)
- jll29 4y agoOutside of chemistry, liquids are typically measured in litres (AmE: liters), a metric unit of capacity equal to the volume of one kilogram of water at 4°C (39°F) and at standard atmospheric pressure of 760 millimeters of mercury. "Gallons" are not a universal metric: For the US, 1 Liter of milk = 0.2641720524 (US) Gallons. For the UK, 1 Liter of milk = 0.2199692483 (UK) Gallons. Because this has been and still is confusing, the standard unit of liter was introduced as a universal alternative (no flamebait intended).
- 4y ago
- WalterBright 4y ago> Demand for food is inelastic I doubt it. I've read that Americans throw away 40% of their food. Obesity rates suggest people eat far more than they need to. And there are major choices in what to eat - cheap vs expensive calories.
- hkt 4y agoRegrettably, calories are not the only concern. Modelling the cost of a good diet is hard.
- WalterBright 4y agoPotatoes, beans, rice, etc., are cheap and healthy.
- jbstack 4y ago> Obesity rates suggest people eat far more than they need to. Obesity rates are also higher among poorer segments of society than wealthy, so it isn't necessarily a given that obese people will choose to eat less just because doing so will make them poorer due to higher prices.
- WalterBright 4y agoThey could eat less, though, and would be healthier for it.
- bombcar 4y agoIt's likely possible that the lack of self-control that is sometimes related to overeating correlates with lack of self-control in other areas such as saving money or avoiding debt. But that's not popular to talk about; nobody likes hearing about personal responsibility anymore.
- Arrath 4y agoIt can also be a learned reaction due to past experience. Shortage or hungry times resulting in an instinct to overeat when food is available to act as a buffer should bad times come again.
- njarboe 4y agoDemand for a certain number of calories per day is somewhat inelastic. How you get those calories is very elastic. Steak versus rice and beans.
- dazc 4y agoI'm not sure how this cartel like behaviour works in the UK where every major supermarket has its own range of competing products - and then there is the likes of Aldi that is 90% stocked with brand lookalike knock offs? There are currently competing narratives in the UK about food prices - greedy supermarkets v poor farmers and the same people complaining then say they shop at Aldi because it's cheaper. Food is still cheap - it represents a small percentage of people's income. However, in the UK, we are beginning to see that food produced without the benefit of slave labour is somewhat less cheaper than it used to be.
- jbstack 4y ago> Food is still cheap - it represents a small percentage of people's income. If you look at it as an average for the population, sure. But that masks the real issue, which is that it hits poor people the hardest because spending on food doesn't scale proportionally with income.
- dazc 4y agoTrue, it could have a more significant impact.
- surement 4y agoActing like "food" is a company is absurd, there is a ton of competition and substitution in the market, no one actor has the capacity to influence "food" prices in general. If they did, then were they just being altruistic three years ago by not raising prices?
- treeman79 4y ago[flagged]
- skippyboxedhero 4y agoThis isn't how the market works in the UK, or anywhere close to it (because distribution is heavily consolidated). The main change has been energy prices (it is complex because supermarkets stopped selling some products, so the price recorded is not what consumers experienced because the product largely wasn't available). Also, just generally, that isn't how demand for food works either. It isn't elastic, there are substitutes for every product. The main factor driving differences between countries is usually the structure of the food supply chain and exposure to trade.
- legitster 4y agoThis is a pretty lazy narrative. Prices are rising even in non-branded goods and markets. Smaller retailers are not-undercutting the bigger retailers. Couscous and margarine and eggs being more expensive across the board at the supplier level. This does not speak to any sort of cartel behavior.
- deleted 4y ago[deleted]
- madaxe_again 4y agoYou’d be surprised at how few importers actually provide most of the imported foodstuffs in the U.K. - Lamex and IPL for instance. Brexit has made importing untenable for a lot of smaller operations due to the red tape, and many have moved their buying to import agencies or domestic wholesalers. There are quite a few significant supply bottlenecks in the U.K. food supply chain, from supermarkets to wholesalers to importers, and they do allow for price fixing - demonstrably so in the case of supermarkets and domestic produce.
- tootie 4y agoNot to veer off into the psychology of it, but there's just such an overwhelming desire by most people to place blame for any misfortune on some intentional human behavior.
- bombcar 4y agoIt's the root of conspiracy theories - it's much easier and nicer to think there's some cartoon villain somewhere making your life miserable; it's much harder to admit that the world is just annoying and painful. Also with a "big evil" you can tell yourself that removing that evil would solve everything.
- tootie 4y agoA lot of times, the villainy is really the collective self-interest of thousand of people in a supply chain or open market. No one is going to willingly pay more or sell for less than they can get at any step of the way. I use housing as a good example since it's been a major driver of inflation and most houses are sold peer to peer on the open market. If you're selling your house and you see comparable houses selling for $900K, but you only need $750K to earn enough profit to buy your next house, what are you going to do? Sell for the lowest price you can afford? Or sell for the highest price you can get? You'd sell for the highest price. And that same calculation gets played out at every level of every transaction in every corner of the global marketplace. Yet nobody would think of themselves as being a villain for doing it. Or be accused of gouging.
- izzydata 4y agoJokes on them. I just eat less food now to compensate. That will show them.
- felipemnoa 4y agoAnd to put cherry on top, you will become leaner and healthier. Now THAT will really make them think twice!
- onion2k 4y agoAssuming that izzydata ate a poor diet before. They might just become malnourished instead.
- lm28469 4y ago> so it makes sense that companies are raising prices as high as possible since people still have to eat. Even drug dealers aren't that greedy
- banannaise 4y agoHousing works the same way, and we've seen the result of that. If food distributors are able to coordinate price increases without direct collusion, expect it to go the way rent has.
- unmole 4y ago> raising prices as high as possible Why did companies wait until this year to do that?
- ImPostingOnHN 4y agoso gullible people not paying attention to their profits would just blame inflation for the entire price increase rather than recognizing that greed is driving a chunk of it
- themaninthedark 4y agoWe had shortages of ammonia, a key component of fertilizer, last year. That drove up fertilizer costs. Not a huge surprise when the output goods are then marked up.
- locallost 4y agoThis. The last part, thank you. I think it's a major problem in the economy today. For a market economy to work there needs to be competition, but there's too little of it. If the prices are too high, the market response should be to produce more. But it's not happening - even if you produce something you need to get it in stores and every country is dominated by a few huge chains. They don't want to do business with small time producers. So in multiple parts of the chain you have entities that can basically do whatever they want.
- mhardcastle 4y agoAnimal feed makes demand for food highly elastic. Simplest example, you can convert #2 corn to cow feed and make 1 calorie out of 7, turn it into chicken feed for closer to 1:2, or turn it into corn-based food directly. People can and do shift consumption to cheaper substitutes, like chicken instead of beef (or oatmeal instead of eggs for breakfast).
- joshlemer 4y agoDemand for food is highly elastic. Food is not a homogenous substance that costs the same to produce each kind. When people are feeling more flush, they will consume more expensive food products (lobster, beef, fish, berries, mussels) and when they are feeling more price conscious they will economize on cheaper products (wheat, lentils, rice, tofu, chicken, beans, vegetables), and by wasting less food. We're talking about literally thousands of different ingredients and products, produced in different ways in different regions, that can to one extent or an other be substituted for each other.
- AviationAtom 4y agoMany of the workers in these factory jobs decided it was a good point to retire, decided it was more worth it to stay home with their kids, found a calling in a different career, went back to school, etc. This all had had ripple effects throughout the supply chain, making for less goods available. Combine that with low unemployment, hence many folks competing for those goods, and it's easy to see why we are where we are.
- boringg 4y agoCorporations locking up their margins making records profits - mainly retailers but probably the full supply chain.