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Is the consolidation of food companies and them artificially driving up prices to increase their profit margins the actual reason? I'm asking because I don't kn
by elmerfud 2y ago
Is the consolidation of food companies and them artificially driving up prices to increase their profit margins the actual reason? I'm asking because I don't know. In my general experience that doesn't happen very often. They strive to keep their margins the same as a percentage of the cost. So this means the margin is a larger dollar value but as a percentage it's about the same. This would point to something else causing an increase in the supply costs. This also gets magnified down to the consumer because the retailer is still going to strive to keep their same profit margin percentage as well.
One thing that I suspect is that labor costs are going up. I understand people feel that wages aren't keeping up with inflation but wages are also going to continue to drive inflation. One thing that's always struck me as strange, is when I was young I remember food co-ops being a thing and farmers selling direct to consumers through the co-ops or other farmer markets. Those prices were always significantly less than what you would pay at the stores. There was still big box stores that could keep low margins. Walmart still existed large grocery chains existed, etc... now anytime I see a local farm stand or a farmers market or any co-op-based thing the prices far outpace what you get at even the most boutique grocery stores. Often times a lot of these farmers markets are simply selling repackaged goods from these grocery stores too.
I suspect the drive for all of this is that we have artificially inflated our food price at the supply level and it is now trickling down to everyone. The massive amount of subsidies we pay out to farmers and the massive amount of money that is spent to artificially keep prices high and the tariffs that are issued against imports of foreign foods all drive these crazy price increases. The fact that farmers feel like they need new tractors every few years and that big companies like John Deere have betrayed their customer base by blocking right to repair and the government has done nothing. That seed companies have taken over the agricultural industry and want to license the use of seed instead of selling it. And if you've ever engaged in one of those license agreements for seeds woe be unto you if you try and take a non-licensed seed because you will be sued.
I think if we want to really address the food price problem we need to start fixing some of the core agricultural problems. Cuz I don't believe it's with the food brands themselves it starts much earlier in the chain.
- mistrial9 2y agoI dont know either.. but I can say that in some extractive industry, for example timber and wood products.. in a commodity market that is an old, established market.. profit and economic expansion that occurs in other aspects of the economy do not reach the economics of the timber. In other words, newly minted millionaires by stock offering and corporate employment in the cell phone industry, do not move the needle on the core parts of the old, commodity timber products. Public news and government statements act as if there is "one economy" that is doing well or not doing well, but this is superficial .. trade goods transacted in the US dollar are sort of linked; trade of goods and services under a unified set of laws like USA interstate commerce laws are sort of linked.. but in Truth, there are winners and losers each year, and that extends to whole market segments, too.. This is a long introductory statement to say that.. just because landlords in Santa Clara County California are driving Porches, or ex-FAANG digital nomads count their money in units of $100k, does not at all mean that big, stable companies and their owners and investors, are seeing the growth that others nearby are seeing.. SO .. how to "catch up" when you are an big brand food company? raise prices.. "greedflation" .. but its not just greed, its a distribution system of profits.. this is an old situation. Stock markets are supposed to ameliorate this friction but not perfectly.. young Turks want Lambos, not fairness. There have been sarcastic articles about medical doctors that are envious of stock brokers because the doctors cant buy the biggest houses anymore.. but it also includes a local Mexican restaurant going broke on labor and food costs, while Lambos drive by on their way to the airport.. source: personal musing
- n4r9 2y ago> In my general experience that doesn't happen very often. Pumping up prices is exactly what large corporations seek to do once they have a large market share. If possible, lowering costs at the same time. Matt Stoller has an article explaining how Walmart did this from the 70s through to this century: https://www.thebignewsletter.com/p/walmart-americas-food-government https://www.thebignewsletter.com/p/walmart-americas-food-gov...