From Our Print Edition

The government is helping states root out price gouging. It’s also taking a closer look at consolidation in the food industry.

Although food-at-home inflation is (finally) slowing, grocery prices jumped 11% from August 2021 to August 2022 — the biggest annual increase since the 1980s. As shoppers tighten their belts, unit sales are falling: down 4.6% in the frozen department and 2.3% in refrigerated during the 12 weeks ended June 18. Dollar sales, however, are still rising.

While many price increases were justified, consumers are beginning to suspect that supermarkets and their suppliers are taking advantage of the situation. Retailers point the finger at manufacturers. Manufacturers blame retailers. All consumers know is that their grocery budgets are stretched to the limit while companies on both sides enjoy record profits. So now the government’s getting involved, which is rarely good news for anyone.

THE FEDS STEP IN

The Biden administration announced last month that the Department of Agriculture will work with attorneys general in 31 states and the District of Columbia “to address anti-competitive markets in agriculture and related industries that result in higher prices and fewer choices for consumers and producers,” according to Roll Call.

According to a senior Agriculture Department official quoted by the newspaper, one of the goals of the Agricultural Competition Partnership, which includes both funding and research support, is to “help stop conduct like price fixing or price gouging in grocery retail markets…”

Of course, Washington being Washington, not everyone agrees that the government should be involved, with critics calling the plan “government overreach” that could hinder economic growth. Others argue that market forces alone will keep prices in check because, well…capitalism.

Time will tell whether or not the government’s involvement in this issue is good for the industry. But one thing is clear: increased government scrutiny isn’t going away anytime soon. In fact, even though most economists don’t believe market power is directly related to recent inflation, they do think that dependence on an increasingly smaller number of super-sized companies may have exacerbated recent price increases. As a result, the government is also taking a much closer look at consolidation in the food industry, including the proposed merger between Kroger and Albertsons.

“The Biden-Harris Administration is committed to addressing corporate consolidation and its negative effects on the U.S. economy, such as unfair competition and increased prices,” said Agriculture Secretary Tom Vilsack in a statement announcing strengthening enforcement of existing laws. So fasten your seatbelts, every- one. It could be a bumpy ride.

READERS REACT TO LETTER

Finally, we received this e-mail from retired Sargento exec John Bottomley in response to a letter from Vyacheslav Bublyk, CEO of a Ukrainian frozen fruit manufacturer, published in our July issue: “I enjoyed your article on Alte Foods and its trials dealing with the war in Ukraine. Even though I’m retired, I recall how frustrating it could be dealing with logistics, out-of-stocks and other everyday demands. However, this article reminds us all how lucky we are to not have to deal with the issues this CEO and his company are facing.”