Shrinkflation is also a huge factor. The amount and quality of food has dropped dramatically, so bills are higher and we are getting less. Classico tomato sauce is a perfect example. The product is watery and flavourless compared to what it was 5 years ago.
You probably got that product from highbury canco. It used to be heinz. (They rebranded to buck their union) I worked there. I make my own tomato sauce now.
@@M.2000-v2g I’m in california, but I’ve lived around- seems like the price difference disappears in HCOL places but is still pronounced in lower cost metros
As a former head of pricing for a major CPG company, I can tell you that perimeter items (milk, cheese, meats) have a fixed markup above cost, with grocers rarely increasing that markup (they can always decrease them to order to influence store traffic). They are much more likely to reduce # of weeks on sale (people buy rest of the store on sale about 80% of the time) or push manufacturers to shrinkflation which is much easier when you have a lot of private label goods on shelf. No gouging or secret meetings necessary as they all watch each other very carefully and usually it's the big guys that lead the market
It’s a systemic issue. No simplistic slogan or solution can fix it. You need to examine the whole system/ supply chain and find areas where it can be more cost effective. I’m sure grocers would rather keep prices steady while reducing cost (to increase profit). So the incentives are there but perhaps a further comprehensive examination is needed.
Thanks for highlighting the labour cost component. I looked at one of the big 2 grocery chains in Australia and whilst I could see an argument for "increased labour costs" being a motivating factor in raising prices (could even see an argument being made to justify preemptive price increases in the expectation of higher labour costs); I decided it was bullshit when I noticed that whilst the grocery stocker got at 5% raise after a couple years, the executives gave themselves ~20% salary raises, nevermind changes to the non-salary components.
Wages don't increase prices that much. A grocery stocker is expected to stock about 1 case per minute (including straightening the selves and breaking down boxes, and other related duties), and most cases have an average of 12 items. You could pay a grocery stocker $20 per hour and you would only need to increase the price of each item by 2.8 cents. 60 x 12 = 720 items per hour $20 / 720 = 00.028 dollars = 2.8 cents Obviously there are others in the supply chain, but they usually cover more product with their labor. Truckers carry hundreds thousands of items in each load, janitors clean entire sections of the store, cashiers swipe several items per second and stock or clean when they're not busy, etc. An extra 3 cents for a bottle of ketchup is not the problem. What's really happening is businesses (both upstream and down) notice when consumers have more money and increase prices to capture it before their competitors do.
He also showed that wages increased 4%. That was on labor that was 40% of item costs. That's a total of 1.6% in total item cost due to wage increases. That's nowhere near the increase in retail prices.
Excellent point. The video also didnt touch on executive yeam pay. A CEO raising prices 3% and then the board giving that person a $50 mill pay raise could cause gross margins to remain flat. Then that CEO on the board of another company scratches the back of the CEO that gave him a raise. That could also explain at least some of the higher "labor" costs in the US - where the good ole boys system is the strongest it has ever been.
@@methodsignature that 50 mil is also affected by inflation, if the margin paid to CEO's is the same before and after inflation spike, then no issue here it just so happens that inflation is historically spiky. so it tend to spook people and claim capitalism fails. eventhough the whole point of inflation is trying to find the equilibrium with the new currency valuation drop. If anything, the fact that it's spiky. means the market corrected and find the new equilibrium extremely fast preventing a whole collapse
From the data I've read, the greed problems are further up the supply chain. The egg industry in the US recently lost a price fixing lawsuit, and the abattoirs profit margins have increased impressive amounts especially compared to grocery stores. My information on that may be incorrect though.
Well don't u remember all the chickens that had to be killed and all the places that went up in flames? Go back to 2021 and 2022 and see the millions of chickens that got sick and also the places that burned up
@@kyle6781 The was a big thing and from the farmers I talked to the testing methodology was highly suspect, but the egg price fixing had been going on for decades.
@@WAGMILLC "The was a big thing and from the farmers I talked to the testing methodology was highly suspect" - The testing methodology is fine, but they don't like the "one positive means you have to cull your whole flock" aspect of it. The problem is that it's INCREDIBLY contagious and we don't have a vaccine. The only means of prevention we have is culling the whole flock if there's even one clear positive. (Chickens catch it from wild birds. Chicken coops are not closed ecosystems.) The testing methodology is PCR, just like our COVID testing, and it's run in state labs, usually at universities, by trained professionals. Results are reported out by machines, verified and reviewed by humans, and rerun if there's anything even remotely suspicious (like if the machine says that the sample didn't give an expected result, or the controls on a batch came out wrong.)
I never really thought that it was the grocery stores that were price gouging people but more so the companies that sell to the grocery stores, like the meat industry for example
A couple slaughterhouses were accused of that, but it was found the price of meat simply changed in the amount of time it took for cows to go from farm to store. That's a risk that works both ways, and it's best just to just buy/sell a futures contract so you don't have to worry about it
Grocery stores are in a very competitive industry, look at Walmart and Costco, Aldi, all of these grocery stores built their name around being cheap or cost effective stores in the first places and that’s how they succeed in the market. If it is grocery store doing pricing gouging or price fixing, the increase in margin will soon attract another firm to come in and scoop up the market shares. Under most cases, I believe it is upper stream suppliers doing the price gouging rather than stores itself
Remember friends, low inflation does not mean lower prices. It means prices go up on a slower rate. We will never undo the 25% increase in food prices. Not without deflation. Central banks work hard to make sure that never happens.
200% increase in costs since the 1990s for some things, even 400% increase in price for others (gallon of gas, for instance), and yet the average wage didn't increase proportionally. Not even close.... I remember: a gallon of gas for 1.50. Now it's $4.90 or more, for a while it was $5.90 on average for no reason. Some places it was $8/gal. a stamp for 31 cents. Now it is, what, 47 cents? It's a stamp. Did it really cost ~24% more to make millions of the same thing? The cost to make them should have actually gone down carton of milk? $1.49. Now it's $4.50. Where are all these job opportunities that doubled their wages since the 90s? I'm not going to count minimum wage, because it starts off being abysmally low to the point where it's not feasible to begin with in terms of an income...yet most jobs hover around minimum wage to maybe $4-6 above it. Well, $4-6 above something like $15, is still absolute poverty pay in today's society, yet seems like 95% of all jobs pay around the same amount, which is...not enough. Even the higher paying jobs that are trade based jobs, etc., also don't pay enough to keep up with prices of goods and services. Hmm.
I'm going to say yes, cause after they signed the Good Grocer thing the prices all of a sudden went down 30-50% at our local store. Also independent grocers have still been really cheap. For example, the small town I go to, has 1kg of oats for 3.49. If I go to superstore they want 4.99$ for the same bag of oats.
‘Our margins are tiny!’, says the industrial meat packer who just awarded himself and staff 200% bonuses increasing wage growth for the whole company by 9% with no raises on the production line. Creative accounting is the name of the game.
Exactly, we need to avoid letting these large centralized companies from controlling prices by creating a large centralized government to control prices. 🤔
@@jarrodmagnusson4101you know how hard that is to do nowadays? Almost all foods and even snacks have been gobbled up by I think it was 8 major companies at major grocery stores like Kroger. No room for competition (aka: an Oligopoly)
I think we should emphasize the fact that from 2007 until 2015, the price of bread was fixed to be artificially high. Loblaws came clean (yes a rare Galen Weston W) and issued gift cards to say sorry. But everyone elese got off without any consequences for EIGHT years! And even then, only one company had to pay a fine, the rest haven't been punished. Maybe they're innocent? So forgive me for not giving yet another oligopoly the benefit of the doubt.
Pretty much my take. For as much as there are a bunch of complicating factors as to why food prices are rising, and food quality is in the toilet, I don't trust the Canadian grocery corps as far as I could yeet Galen Weston's cringy ass.
Loblaws’ gift card program was to diminish the number of consumers who could engage in a class action lawsuit, the “coming clean” was nothing other than them seeing the writing on the wall that this could not be covered up forever, and a weak attempt to encourage complacency
Bingo! Worth noting that even this may have less to do with corporate greed than with the insane cost of complying with federal regulations surrounding the meat packing industry. The big meat packers have basically achieved regulatory capture, then we wonder why there isn’t more competition.
Deregulation would go a long way in getting more competition in this space. Mom and pop shops can’t afford to have a full time paid usda inspector like the big boys can.
Are the regulations bad tho? They are costly, sure , but they are there for a reason. Mostly workers ans consumers safety. You can argue that there arw to many but i'm inclined to say "tell me specific regulations and don't just point a finger"
@@iulioh as it is in the US now. A mom and pop shop could butcher a cow without a USDA regulator onsite. But only if the consumer buys the entire cow. If you allow people to buy individual meat cuts from them it would make it cheaper for families who can’t store a whole cow in the freezer.
@@iuliohI agree with you. It’s insane that people are still pushing that the meat industry is over-regulated there’s people actively dying from the Boar’s Head listeria outbreak due to the Trump admin’s deregulation of meat processing facilities.
What makes me skeptical of grocery giants claiming this is not on them is that I don't see the same increase in price at the local grocery store run by an independent family as I do at Loblaws. I don't know what Loblaws is doing, but it seems to me suspicious that things are more expensive at Superstore than a small-scale independent place. I mean, I'm happy to shop at my local family-run shop, but most people don't have that option, so what's happening? Are people in the cities subsidizing margins at rural locations? Is my local store just destined for bankruptcy? And like if it is that Loblaws is, for example, smoothing prices across more difficult-to-reach locations, then that's not something I'm too mad about, but as it is, they haven't said that, and I have absolutely zero reason to trust a business that has already admitted to behaving uncompetitively.
Smaller stores require less infrastructure costs and other cost additives. Take milk for example. It is in the freezer section Smaller stores need less freezer which depends on the store a small increase is added to the price and it builds up
@@Lostboy811 That is not logical at all. Economies of scale has always been a thing. Larger enterprises have lower ratios of overhead cost and "infrastructure" than smaller ones.
I'm not sure about Canada, but in the US, cities are absolutely subsidizing rural grocers, and locally owned grocers are destined for bankruptcy without government help. Like all things government, the aid is not efficient, so there's a dozen different initiatives out there supporting rural grocers, but a quick google search brought up the Health Food Financing Initiative by the USDA that provides funding for capital investment to grocers in underserved regions.
@@LionRoarTeaching i am assuming that that would not be sustainable but I did speculate that it may be that the grocery store I go to is just not turning a profit. it’s suspicious to me that things are more expensive at superstore, but that doesn’t mean there couldn’t be explanations outside of greed, just that it’s something I feel needs an explanation for me, since my understanding of economies of scale dictates a store with the market power of superstore should have lower costs per product than my local family run store.
Grocer economics is fascinating. From an external perspective, it feels crazy that labor costs weigh so heavily when it feels like every store around me is dramatically understaffed. I wonder if large grocers would benefit from shrinking their footprint and product offerings and focusing more heavily on items that sell more frequently. Some of these places have massive buildings and mostly empty parking lots - all that land must increase overhead dramatically. I've walked around some of my stores for hours out of boredom and have come to a realization that the majority of "specialty" products that fill most shelf space only have a handful of buyers in a given day. Grocers also damage out a ton of fresh product due to bureaucratic nonsense and from hiring employees who just don't get paid enough to care. It's hard to believe that endless large mergers is the answer to a system that feels filled with inefficiency.
The crazy thing is wages don't increase prices that much. A grocery stocker is expected to stock about 1 case per minute (including straightening the selves and breaking down boxes, and other related duties), and most cases have an average of 12 items. You could pay a grocery stocker $20 per hour and you would only need to increase the price of each item by 2.8 cents. 60 x 12 = 720 items per hour $20 / 720 = 00.028 dollars = 2.8 cents Obviously there are others in the supply chain, but they usually cover more product with their labor. Truckers carry hundreds thousands of items in each load, janitors clean entire sections of the store, cashiers swipe several items per second and stock or clean when they're not busy, etc. An extra 3 cents for a bottle of ketchup is not the problem. What's really happening is businesses (both upstream and down) notice when consumers have more money and increase prices to capture it before their competitors do.
Over 4 years, I’ve watched the price of eggs vary drastically week by week. Seemingly, the price is always substantially higher when stock is low towards the end of the week. I’m talking 30-50% increase depending on the day. This didn’t happen prior to COVID so it’s awfully suspect to me. Each week I have to check if eggs are affordable or if I’ll have to come back later. Something odd is going on. Although it has been primarily specific to eggs.
Eggs and milk seems to have very variable price, my guess is that they are very low margin items and they follow the market while processed food have bigger margin and can assorbe some loss for a period before needing a price increase.
A conspiracy to make the price of eggs be more volatile makes no sense... There's no advantage to the suppliers in that. It'd just be fixed a at some high value like $5 for a dozen and not fluctuate at all. I think a lot of the volatility has to do with supply fluctuating depending on flock health and all that, yet demand being pretty inelastic. A lot of people are buying eggs no matter what they cost because it's a basic staple they always keep around.
What about private equity group raiding? Where private equity groups take ownership of a company, buy all its assets, and then rent those assets back to them as a form of wealtg extraction. Allowing the company to report razor thin margins no matter the money brought in. Aka the gross margin doesn't change but the private equity group makes bank. If you follow a loaf a bread, it goes into the food conglomerate costing like 32cent and comes out costing a ton, and being the same.
Didn't you see his other video on private equity groups? They're actually really nice guys who don't actually control anything. People just blame billionaires and megacorporations for problems they have nothing to do with! I'm sure glad we have this dude to tell us the truth.
My problem with the "corporate greed" explanation is that corporations didn't just suddenly decide to become greedy in the last few years (it's not like they weren't before). Nor could a corporation single-handedly increase their profit margins when people can buy a product elsewhere or buy a different product. So blaming price increases on corporate greed doesn't actually explain what's going on. And making policy based on an inaccurate picture is unlikely to produce good outcomes.
So, where is this "extra" money we're paying for going exactly? Groceries are up 25%, and like you said, the margin for supermarkets is like 3%, so it's not them. Same thing for other links in the supply chain, none of them have particularly high margins. I know salaries in general are up, but is that really the whole story? Or where else does the money go?
@@Seth9809 the minimum wage is irrelevant, no one is making that anymore. Even fast food places in low cost of living areas pay significantly over minimum wage and are desperate for employees. Per the FED and countless other sources wage have risen significantly more than inflation since 2020, with all of those gains going to blue collar and service (generally low income) workers. White collar (high paid) salaries are flat to down with pressures from AI. Has that reversed decades of wage stagnation? Absolutely not. But it’s a real, like primary, driver in increased grocery and fast food prices that are closely tied to service worker wages.
When in doubt, always blame wages. Remember, workers should be poor and there is absolutely no way to run a business without exploiting the people who work for you. Also we reported record profits again this year!!! (But please pity us. Workers are ruining business)
Fellow Canadian here. Thanks for the analysis. I always thought supply/demand forces were more likely to explain the increases than price gouging, so I'm not surprised to see their profit margins aren't crazy high like some would believe. Regardless, I don't like Galen Weston so Loblaws can eat my $1.50 hotdog I'm a Costco lifer now
You don't have to "believe" anything about margins because for a public company that information is freely available. Unless you want to take the conspiracy theory to another level and claim that they're also manipulating their accounting to understate profit 😂
@@2639theboss Corporate accounting has two jobs. Report as small of a taxable profit as possible, and report as big of a profit to shareholders as possible. For both tasks there are generally accepted accounting principles and there is creative accounting. But if there is price gouging, it would definitely show up
@@cavemanstyle1376 Obviously, 99% of people don't look at figures for grocery store margins. That's where "belief" comes into it--they don't even check the facts, but make assumptions that fit their world view.
Would love to see a deeper dive into specific grocery companies. I looked at the margins for target and they had a rise of about 3% gross margins during Covid which have mostly gone down. However it was my first time diving into the different margins and this video helped explain more of those.
Accessibility request: charts like @6:47 for a person without colour sensitivities are 80% broken if the order of the legend doesn't line up with where the lines charted either start or end. At least if ordered by by the ending positions even colour blind folk could gain everything from this chart instead of only see dots, dashes, and solid lines. Or colour selection could maybe work too, not sure though because I'm not even fully blind but still can't tell lol 😅 If you're looking for ways to improve that'd be an easy one to write as a script, that's all, not a big deal. Thanks for all the hard work, love this channel. People who aren't subscribed are doing themselves a disservice.
Well my assumption (before watching the video) was that prices have gone up way beyond the inflation rates reported. On top of that, at least for chains in Canada, their profits have been better than ever. This makes me think that not only are they off-putting costs onto consumers, but also they are trying to squeeze as much as they can. Let’s see how my assumptions compare to what you bring to the table Richard. Thanks for sharing!
Imagine your money is increasingly getting devalued and you have to budget for the next whole year, trying to keep your profit margin stable. It's impossible to predict future prices, so companies just guess... So for better or worse, this uncertainty will impact prices as well. Expected inflation is almost as bad as real inflation, as you lose the value anchoring and lose faith on the currency.
Not all CPI goods inflate equally. The stated inflation rate is just the average of them all. Food and gas were the largest contributors to inflation so the overall economic inflation rate would have to be lower in comparison.
@@toyguy112183No, they love to remove food from the “core” inflation because of how much it fluctuates. In other words, you’re being gaslit by the government.
Currently visiting Brooklyn, NY...walked around (September 19th) and wound up in DUMBO. I purchased one muffin and 4 scoops of ice cream in a cup (treated my nephew to 2, 2 for myself, both scoops only in a cup and NOT a cone). $29. Let me repeat: ONE muffin. FOUR scoops of ice cream. $29. Another day: purchased 3 apples, 3 pears, 3 nectarines at a grocery store. $19. Reminder: Salaries are still $15/hr. in NY and US federal minimum wage in 2024 is still $7.25/hr.
@@snowballeffect7812 no. it means, when companies raise prices we are all quick to call them greedy terrible people. but when we sell our houses and try to get the best price we can from them, thats just a fair market price. everyone is greedy.
@@thomasfoltin3832 maybe you call them different things, but I don't. NIMBYism is primarily a response to try and keep housing prices artificially high for owners and is accurately called out as greed by most people who criticize. and it's simply a matter of fact (which the oil companies have admitted to) that they artificially increased prices simply because they could. Providing excuses for them like 'everyone does it' is not valid and does not lead to any solution, either.
@@thomasfoltin3832 they literally admitted on national television that they raised prices by artificially limiting supply because they could lol. conflating market prices with price fixing and cartel activity is invalid.
I think it's mostly inflation but also some greed. When the general public thinks there is a lot of inflation that gives all the stores an excuse to raise prices at once while still competing on certain products with sales, etc. to get people into their particular stores. Then as their costs do rise they do have to increase prices while trying to stay competitive. In any case it's more complex than a store just charging a fixed markup based on their cost. It's the same with layoffs and recessions. Once enough people start talking about a recession coming, businesses use it as an excuse to start doing layoffs without signaling that they are having problems unique to themselves, which in turn creates a recession or makes the inevitable recession worse.
Some companies that were already struggling and had to close stores in California conveniently used that to blame the minimum wage increases. On the other hand, things like interest rate increases and wage increases can cause a company that was teetering to tip over so they'd be technically right.
@@sor3999 They had a lot of different problems going on including out of control crime due to the lax laws on shoplifting. Raising minimum wage doesn't help there either. There is only so much people are willing to pay for a good or service and if you can't meet that price at cost that leaves room for profit it's no longer a viable business.
neither grocery stores nor companies control the supply of money, and the supply of money is the primary factor of inflation. i will leave you to figure out what entity controls the supply of money and what decisions have been made affecting it.
@@j.reinholme Are you or anyone you know receiving any portion from this "supply of money"? I am honestly just beyond shocked that people still talk about money supply when discussing these issues. 1. It's dumb and makes zero sense. How is "money supply" causing price increases? Who is spending this money and allowing it to get into the economy and cause havoc? 2. Why do corporations argue that they are legally required to charge as much as possible in order to fulfill shareholders requirements and stay inline with the law? Wouldn't that be a strange stance to take if they were attempting to keep prices as low as possible? Nothing you said would make sense to someone with a child's ability to use logic. Let me know who has access to this money supply and continues spending it so we can finally fix inflation! Thanks!
Economic illiteracy is a big problem. So many people just think "inflation is X, so if the price goes up more than X its price gouging" as if different products dont have different costs that are affected by different factors. One of the most damaging things you can do to an economy is to start acting like prices are arbitrary and not a reflection of the total market around them
I would be more interested in diving more into the food processing industry. I feel grocery stores are naturally a more competitive market, and thus, not likely a place you would find significant “greedflation.” Historically and recently as well, meat packing has been more of a sector where corporate consolidation is rife, meaning you’ll likely see more anti-consumer behavior in that fragment of the industry.
Unfortunately it is much easier for politicians to sloganeer and I cant imagine most people understand the masterclass you put on equity value. Great content, keep up the good work!
Blaming price increases on company greed today implies that they were less greedy yesterday; that's obviously nonsense. Companies always operate at maximum greed, all the time. Greed did not change in the last few years; moronic economic and monetary policy from governments around the world did. Any politician who says otherwise, is trying to distract from their own failures and insulting your intelligence.
Greed may not change, but the opportunity to express it has. The excuse of covid let the genie out, and now it's a race to see how high they can go before people sic the government on them.
@@RandomHandle120 Not sure if you're insulting yourself. What explains outside policy which resulted in 33% increase in shareholder distributions (Loblaws, 2022)? Coincidently, their stock more than doubled since then.
Not only do we have inflation but we also have shrinkflation at the same time. Pre covid i could get a pack of 28 jalapeño cheese sticks for 6.99$. I now get 21 for 9.99$.
in the next video around this topic, I think it be good to pick 5 main staples of food. And cover the main companies/competitors in that space who sell to the grocery stores, and look at their operating costs and margin. A'int no way in hell eggs and milk and cheese and bread and meat aren't being absolutely price gouged to all shit.
I think it’s that the market has actually inflated by a lot more than was reported. Houses increased by a lot more than 2% per year. It was contained in assets like stocks and houses at first but it’s slowly leaking into the everyday goods as well.
This really doesn't feel like it paints an accurate picture. It's one thing to blame commodities prices but there should be a balancing deflating factor when they drop again in that case. Instead we only have 'stable' inflation now, 'normal' gouging instead of 'extraordinary'. Something missing from your data is the timing of wage hikes vs cost increases, since it is taking both as a result of a multi-year window. It would only make sense that after a price gouge (which can only be for a shorter period before it becomes untenable for the market) there's a regression back to the mean in the profits, because they have to raise wages due to gouging past what people can afford. The important factor is not how much profits are up over five years ago, but that they are still up.
One thing that annoys me is that it is always the consumer that's expected to take the hit when things go wrong in the economy. I saw an interview with a landlady a while back who "had to" increase rent by 9% because her mortgage had become more expensive. But the reality is she didn't have to. As the richer person in the transaction, she could have absorbed the costs herself, maybe gone on one less holiday this year, or forgone that new car. But no, instead, her much poorer tenant was expected to pay for her financial risk, presumably by forgoing avocado toast and Starbucks. And I think that's what makes people angry. The supermarket's profits are "only up by X%," so it's not them that's responsible for the huge price increases. But why should they be up at all? If they have a huge increase in costs, why should their profits not be down? Don't get me wrong, I know the answer to this question, but the point is that people are a bit fed up of living in a system when no matter how badly the economy is going, the people at the top always make sure they get paid out first.
Profits can be up while profit margins can be down. The secret is volume. A smaller portion of a larger pie can be larger than a larger portion of a small pie, the portions being profit margins and the pies being volume.
You shouldn't even be allowed to rent/lease out property you have mortgaged, you should be the owner free and clear. I recall a story during covid about a landlord in New York who temporarily suspended rent payments because he actually owned the property he was renting.
@@uncreativename9936 That kind of thinking will mean that the only people who would be able to run apartment complexes would be ultra wealthy enough to finance the construction and purchasing of apartment complexes using their own cash. This would drastically reduce housing as well as any business space that has a mortgage.
@@ErbBetaPatched nah because the bank could just own the property and hire a property manager to run it. Similarly investers can just pool their money together to build the property and hire a manager to run it. That's how the townhouse I live in is and unlike the rest of the area, we haven't had rent increases in the past 3 years that I've been living here.
@@samsonsoturian6013Walmart actually started pushing back on food manufacturers who kept raising their prices arbitrarily and other grocery stores followed Walmarts lead.
Definitely possible, albeit the Loblaws CEO took a big pay cut during the pandemic (I believe his salary was cut in half). Executive compensation, while absurdly high, is still a relatively small cost when compared to their revenues.
for q1 2023 pepsico reported 14% revenue change while volume only changed 1%. i think it is clear this is pretty clear example of seller's inflation or "greedflation".
Well that's evidence of price inflation, but doesn't really tell us what's driven the price inflation. Did Pepsico start charging a bigger mark up, or did they charge higher prices because they were paying higher for their inputs? Their net income margin was pretty range bound during the pandemic
Appreciate the nuanced take on this as always. While it seems true that grocery stores being greedy isn't a major contributor of inflation, this isn't the only business who makes money off groceries. For example, if a supplier raises the cost of a bag of chips from $3 to $4, and the grocery store then passes that cost along to the customer, the grocery store won't increase their profit, but the supplier would. So this could be an example of greedflation not considered by the video. Though with the many suppliers out there, this would take parsing a lot more data.
Maybe it's a bit of of a weird way of analyzing the situation, but I feel like the best metric to use here is to simply compare price increases in the grocery industry to Costco by itself. Costco methodically prices their goods such that sales revenue only covers operating costs, and they leave only membership revenue as their profit. This business model gives us a very transparent look into market conditions for the industry as a whole. If price increases for individual stores or broader averages for the whole market track similarly to what you see at Costco, it's a good indication that any price increases are tied very closely to increased costs and not to increased profits and greedflation. If there is ever a true market wide price gouging situation going on, Costco will become a stark outlier in food prices and you will see hordes of people descending on those warehouses like it's that movie World War Z. And that's simply not the case at the moment. Prices at Costco are increasing just as a much as elsewhere. Costco is still just a moderate per unit discount, largely attributable to small volume discounts. Egg prices are way up there, pasta sauce is way up there, chicken is way up there (except the legendary rotisserie chicken of course), everything is way up there just like everywhere else. So I'm pretty confident in assuming that other stores are engaged in little to no price gouging or greedflation, and the price increases we're seeing are due to rising costs of doing business.
Question - Do any of the metrics shown show if a business is funneling more of it's money towards things like executive compensation? Maybe the overall profit hasn't increased because labor costs have gone up, but how much of that 'labor' is people already earning six figures? (or more?)
Good question - no, that's not directly accounted for by these metrics, but at least for Loblaw's case it's worth noting that the executives took a big pay cut during peak inflation. Executive compensation is also still a relatively small cost when compared to company revenues.
"Cannot see the misdeed forest through all the data trees"! Glad that someone pointed-out the Shrinkflation surge by grocery producers. Then there's "Price over Volume", where retailers deliberately do not restock available items, thus reducing inventory costs increasing profits, yet overall prices go up for us. I observed this, when I would go over to a competing nat'l brand grocer and would see the "disappeared" items there, plentiful & even on sale. Then of course, there would be "missing" items at the latter, available back at the former store! And back & forth, on & on.
Great analysis. I was wondering how is it possible for grocery stores to have any price gauging seeing how low their net profit margins are (3.5% for loblaws and 2.4% for empire ltd) . Like you said there are so many reasons behind the price increase, so I really despise the politicians who uses the half truth to gain supports, which will lead to resources being wasted to solve the wrong problems.
@@IntuitivelyCuriousHe addressed price gouging which would show up in profits. Stores need to buy thier products from manufacturers. Tough to analyze manufacturers since product mix changes over time.
Do you have any evidence that he is "shilling" for big corporations? Because The Plain Bagel has generally been very even-handed on most topics. Or have you already made up your mind, and will discard any evidence that doesn't fit your worldview?
I would've liked to see more of a deep dive video, going into specific categories and why they're inflated, whether it's due to profiteering or actual inflation. There are several monopolies in the US on things like meat, which are only controlled by 4 companies. They have definitely been price fixing. McDonalds prices are way too high, the company has committed to scaling back prices because they're profiteering so much they're losing sales.
@@maxweinbach3996 ok… is this comment meant to deconstruct my argument or something? It doesn’t. Addressing affordability of quality food is something governments do to maintain a stable society. If we look at parts of the US New Deal which only addressed availability of food and caused nutrient deficiencies and new diseases, it was the lack of access to food by a large part of the population that was of concern to politicians at the time. When pricing exceeds affordability for many it makes sense that politicians are now trying to identify what is the problem so that they can fix it. If you are wondering why politicians are concerned about this issue it isn’t just about elections. Historical evidence shows that many countries in history had their governments overturned during times of strife where food was a contributing factor. We can look at the buildup to WW1 and WW2 as examples of what caused governments to be overturned.
I thought it was food processing and food manufacturing that were price gouging retail, who then cut a little profit for themselves when selling to consumers. IMO, this question needs more analysis from farm to market to retail, not just retail to table. I do appreciate this take tho! Retail is just as unprofitable as ever, and is getting shit on more by the public. You're doing something to help fix that!
This was really well-researched and thoughtful. Here in the US the big grocery chains are struggling & trying to consolidate further (Albertsons & Kroger) because the margins are only getting tighter. I think price controls are dubious but agree that tighter regulations on the upstream cost spikes & volatility in food availability may be beneficial in a more fragile world.
The grocery chains brought it upon themselves. if there's a villain, it's likely their wholesale suppliers, who can raise prices at will forcing stores to pass it on, but their existence is invisible to the consumer, who blames the retail stores. That's what drove up the cost of restaurant food, first, before wages ever moved. But some clown in the grocery business made a boast in an earnings call about the pandemic situation being a "once in a lifetime opportunity to raise prices" and I don't think they expect those calls to be heard, but they are.
Greedflation is real. Are the grocery stores at fault... Maybe a little but probably not a big part of it. As seen in this video. MOST of it is the suppliers selling to grocery stores. And yes that get grey and complex FAST. But it would be worth realizing that as much as I do NOT want to give grocery stores a pass..... They mostly get a pass, it's the supplies (Hello Kellogg, JBS, etc) that are price gouging.
I can't believe grocery stores JUST NOW figured out they could raise prices, and we'd all still buy it! Almost like that's not the issue at all, and the left wing talking points make no sense.
I wish I could see a similar analysis of grocery stores in Finland because we have effectively only three grocery store chains here and the price of groceries skyrocketed during the pandemic
Housing's different though, it's not truly one market, it's many. Like there are affordable houses for sale in Kansas and Michigan. That does me no good, and doesn't figure into my decisionmaking locally.
Most F&B companies were running near record low inventories coming out of 2019/2020, as the massive spike in demand during lockdown cleaned us out. That’s why free cash flow spiked, then came back down when demand came back down to historical levels. I’m surprised you didn’t look at commodities like soybean oil, wheat & sugar, which all skyrocketed and for the most part stayed that way for 3 years.
In my typical American suburb I have 5 national grocery chains, 2 high end specialty grocers, 3 ethnic grocers, 4 same day delivery online grocers, 2 dollar stores, 3 big box stores, 2 membership clubs, and 2 pharmacy convenience stores within a 15 minute drive of my home. I could source 75%+ of my typical grocery needs at any of these stores. You might have an argument in rare rural areas that may only be serviced by delivery, Walmart, and /or dollar stores.
There are about a dozen companies who own practically all of the grocery stores in the US and Canada, some more than others - for example Albertsons also owns Pavilions, Safeway, Vons, and over a dozen other chains I haven’t heard of; while Kroger owns Food 4 Less, Fred Meyer, Ralphs, Smith’s, and over a dozen more. As for food _production,_ Business Insider published an infographic several years ago showing how 10 companies control almost every large food and beverage brand in the world: Nestlé, Pepsico, Coca-Cola, Unilever, Danone, General Mills, Kellog’s, Mars, Associated British Foods, and Mondelez.
In the UK, the arrival of the German discounters Aldi and Lidl absolutely changed the industry and made it a lot more competitive. Whenever there's a spike in food prices they see a surge in customers. Many people still prefer to shop in the more mainstream supermarkets, Tesco, Morrisons, Sainsbury's, Asda etc. most of the time, but if pinched will shift down to these two (and the ones already shopping there end up at Heron Foods or Farmfoods which are honestly only a short step up from a food bank). They're not bad in terms of quality, but selection is more limited with far fewer SKU's.
Ok, so grocery store's aren't robbing us blind. How about the Lay's potato chip company themselves that sell the food to the grocery store? Why didn't you just go one layer back and see if THEY are having insane profits? Yeah the grocery store might not be gouging, but someone sure is.
Don't be silly. Look at off-brand milk. The price perfectly matches inflation because the stores sell it at break even prices to keep customers coming back every week. Some products are also effected by sanctions, like how England blacklisted Russian gas so now other markets have to compete with England for gas. Other products are effected by one-off events like that plague among chickens when a lot of consumers straight up refused to stop eating eggs for breakfast even if they had to drive an hour to get it.
It's mentioned very briefly in the video, but even food manufacturers didn't see any meaningful movements in profit margins> Lays is owned by Frito-Lay, who is owned by Pepsico. Pepsico's gross margin/net income margin were 55.4%/10.9% in 2019. In 2022, they were 53.3%/10.3%
When companies get up to shifty stuff they generally have to agree with eachother to do so, which would inevitably result in a leak or snitch going to the gov and blowing the whistle (see Diesel Emissions Scandal). Always good to keep an eye on companies, especially in a place like Canada where there is more power in smaller groups.
@@samsonsoturian6013 Yea and it's their job to be greedy... that is their motive to be in business at all. I don't understand how people think the greed turns on and off depending on what party is in control and needs the excuse to cover for their horrible policies and grab even more power.
Politicians only now blaming retailers to channel public hatred elsewhere. Supermarket chains formed monopolies, dictating price with farmer and jacking up prices for a long time. It’s not as big of a problem in the US depending on the region but definitely not new.
You can always count on Richard to bring a rational, well-researched analysis to highly relevant topics of the day. This (among other reasons) is why I continue to subscribe to his channel :-) !
For an example of unreasonable food price inflation, look at high margin snack foods. Things like soda/pop, potato chips, and chocolate bars are very high margin items, even for retailers. The input costs are a small fraction of retail prices. Yet from 2019 to 2023, pop prices rose 59% and sales rose 56%, yet unit volume fell by 2%. The increase in sales is entirely attributable to increase in price, not an increase in volumes. This is a consistent 15% YoY increase in prices! None of that had anything to do with the pandemic, as the prices, sales, and volumes are nearly straight lines throughout 2019-2023. This is entirely price gouging. To be clear, these increases aren't from the grocery stores, but from producers like Coke, Pepsico, and Keurig Dr. Pepper. Grocery stores and labor costs are both scapegoats for greed from the suppliers' side.
People think prices going up has to be greed because they assume hard times and things going wrong could never happen, so more expensive food must be evil intent
I really appreciate your measured approach. It just always gets me that these companies report record profits every year, and corporate compensation keeps ballooning, but we're supposed to believe they're not actually making more money? Idk. Blaming cashiers and stockers makes me extra suspicious (not saying you're doing that).
While testifying to a Federal Trade Commission attorney Tuesday (court hearing for Kroger's intent to acquire competitor Albertsons), Kroger's Senior Director for Pricing Andy Groff said the grocery giant had raised prices for eggs and milk beyond inflation levels. As the old saying goes, "Never let a good crisis go to waste."
Egg prices went up more than nominal inflation because of widespread bird flu which decreased the supply of eggs to the market. Your statement is true but highly misleading.
Inflation should mean prices go up the same, because it's all paid for using the same devalued currency. Any extra price increases is shortages or greed.
I think part of the problem is economic whatevs are looking at industry wide averages but consumers are looking at what they actually buy. And price changes for individual specific items from the same brands over time have been wild. Pretty much nothing has gone down in price, many things have gone up by some smaller percentage that can be explained by inflation yada yada, then you get really specific items that have gone up by 50% or 100% over the last 10 years or even just since the pandemic. And when consumers suddenly couldn’t afford their usual grocery habits, looking at the prices of those specific items was very mind blowing and sometimes upsetting. I’ve been doing online ordering from a local grocery shop for a number of years, so when my grocery bills were up by ~40% I was able to compare prices pre-pandemic and it was only like 8 common items that had really shot up, but they were ones I bought frequently. Once I switched to different brands or cut out the item entirely, the increase was more like 10% over pre-pandemic. Like a vegan mayonnaise had gone from $6.99 for a big jar to $12.99 for a jar half the size. And amusingly, now that specific item is back down to below $10, but I will not start buying it again because I’m petty and also have no time in my life to babysit the prices on items to see how the manufacturer is feeling about their hold on people that month. Anyway, yeah, that’s greedflation. A large percentage increase that’s so optional they can change their minds about it a year later when people stop buying the product. But so many manufacturers did it with their popular/trendy products in a short span that it’s become synonymous with the whole industry.
I mean eggs is the worst example you couldve used, because that is the item where in the US there is significant market concentration and ridiculous price increases that are no way proportional to supply chain issues. Kroger's senior director literally admitted to raising egg and milk prices way above inflation recently in an anti-trust lawsuit
@@IntuitivelyCurious I think that when you combine it with record profits, the picture is pretty clear. The point is that they made a choice beyond supply chain problems. Also, the video doesnt look at the entire product chain. If retailer, producer, packiger, and transporter all add some extra and load it off on the consumer, the picture becomes different. Btw, no one is say that there shouldnt have been any inflation at all, just that its worse than it shouldve been
Milk prices are surprisingly low. You can easily get a gallon of milk for less than $3 right now (depending on region and store I am sure). Egg prices are super high right now but they are always extremely volatile which is why you can't really look at one or two items. I see fluctuation of hundreds of percent in price on eggs which would be indicative of a healthy market with plenty of competition. If somebody was setting the price in a smoke filled room why would the price ever fall dramatically? It would be relatively consistent at a high level.
In Australia our enquiry into the supermarket duopoly found they use their market power to suppress the prices their suppliers (Australian farmers) are able to negotiate. Much needed interventions in the space might further increase the prices consumers pay for goods! All to say, expanded margins might be on the supplier side too, not just the consumer side. Any government intervention with the aim of keeping grocery prices low might look more like a subsidy for essential foods - either payments to producers, or exempting some products like vegetables, bread, milk etc from GST/VAT.
Sure the workers want fair pay, but how about the CEOs' desire to fly private? We gotta protect those precious fragile CEOs from our plebean airports at all cost!
If you should be fortunate enough (via your incredible skillset, talents, knowledge, education, networking abilities, etc) to become a CEO, you may come to realize that how they spend their time is incredibly important to the success of their corporation and that it makes sense for them to fly efficiently. You think a CEO doesn't make a difference? Look at what Steve Jobs did with Apple (it was 6 months from being bankrupt. He turned it around and made it the highest market cap co in the world) - +v example. Or Mike Zafirovski, CEO of Nortel, who couldn't even convince the Canadian government to bail out what was Canada's #1 high tech company, and via his incompetence declared bankruptcy at about the worst possible time possible - -ve ex. CEO's can make a huge difference, either positive or negative. Quit griping about privilege and get there yourself if you think flying private is so important.
Per your sources, its not the grocerers, but rather their suppliers, who're responsible for the hikes in prices. This is by and large what people were saying prior to the politicization of the issue into a generalized and simplified "grocery stores bad", but data in a digestible video helps get the discourse on the subject back on track.
Wtf they mean they had to take losses to get people into the store?? "Inflation is high so I'm not going to eat this year"- said no one. Who quit grocery shopping?? They returned to hunter gathering or something 🤯
This was a welcome analysis. I wonder how much of an effect gasoline prices have on this situation. In Canada, we also had the carbon tax go up during you-know-when. And I would expect that it's a lot more expensive to import foods nowadays, so that too could have an impact on the prices.
I think it's the companies behind the products, instead of the grocery stores for such historical increase in prices. It might be that they assume that customers have gotten accustomed to shrinkflation so they never stopped doing it
I understand there’s a lot of nuance to this and actually lots of factors to the inflation of groceries, but price gouging is still one factor. Punishing price gouging won’t completely resolve inflation, but it should be one part of the solution. There was just a news report of how Kroger inflated the price of eggs and milk beyond their input costs. And they even admitted that they did it in court
A Krouger's executive literally just admitted they price gouged. Other grocers are smart enough to still do it and not say the quiet part out loud. ¯\_(ツ)_/¯
Thanks. To me it just seems like basic arithmetic and logic can clearly show that they're not price gouging. As you said, their margins are paper thin. so assume you have an operating profit margin of 3%, that means if they jacked up prices by 3 points ahead of costs you would see margins increase to 6%, or a doubling of profit per dollar of sales. So when you consider that it becomes impossible to argue price gouging, because you'd see profits up hundreds of percent with a 25% increase in prices, and obviously we aren't seeing that. It's scary that policy makers want to regulate business but don't understand something as basic as operating leverage.
The thing is, the cost of groceries have actually almost DOUBLED near me. (in USD, all the same brand, from the same stores) Kroger store-brand tortilla chips: Were 1.25 in 2021, now is 1.99 Kroger 30.5oz can of coffee: 2021 was 5.99, now is 9.99 Store-brand 4lb bag of sugar was 2.09, now is 3.59 10oz Frozen bell peppers were 99 cents, now are 1.99 1.15 for 12-pack store-brand eggs, now it's 2.30 3.49 for a pound of lunch meat is now 5 bucks Tampico punch went from 1.59 to 2.99 Pasta went from 1.00 to 1.49. Ramen went from 25 cents a pack to 40 cents a pack. Quick oats 42oz went from 2.79 tio 4.59 Soymilk went from 2.79 to 3.99 Vegetable oil went from 2.29 to 5 bucks! The same types of increases can be seen in bagels, cup ramen, bread, Crackers, sweetener, sausage, frozen pizza, cereal, fruits and veg, onions, ground turkey, canned veg and beans, soda, saltines, and so, so many more. If you want me to believe there is a legitimate reason the cost of my grocery bill has basically doubled in the past 2 years, you're gonna be fighting an uphill battle, because these prices are BS.
If you look at the net margins from farm to plate it would seem the final processing step garners net margins of 20% while the retail food net margins remain under 3.5%. So where do they try to squeeze - food retailers - LOL
It’s not the grocery stores it’s the earlier suppliers and distributors that are actually gouging the prices to make up for their losses during the pandemic because they couldn’t accept the sunk cost. Many farmers had to waste a lot of their crops during the lockdowns and are trying to make their money back. I work for the institutional clients division for wealth management and some of our clients are grocery store owners, the profit margins on their businesses are very low!
Gov shuts down everything and gives money to people spend... Price goes up. *Pikachu face* Another considerable detail for the impact is that stocks had been purchased at lower prices for many of these companies, then adjusted for inflation on sales. This is a "fortunate" trade for them. nothing ilegal or wrong. Plus expected inflation is something that plays a big role too, while budgeting during a growing inflation period, you can't precisely predict the future prices that will break even, so uncertainty makes price as well, for better or worse. The only 100% sure thing is that populist politicians will NEVER accept the blame.
While I think food prices are absurd. Lower fuel costs and a general slowdown of the economy will keep them where they are. The problem is that unless wages increase, more than half of Canadians have seen their standard of living drop
I was disappointed I saw you uploaded a video about this, because I knew that meant the answer was going to be nuanced. Thanks for the information, but can I please just go back to blaming corporate greed so the problem seems manageable? Lol
We can still blame corporate greed because that's the reason we are even in this mess in the first place. You can see this easily with fast food with the same shite food being 2-3 times more expensive for no reason. It's not exclusively corporate greed, but that's a giant factor.
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Shrinkflation is also a huge factor. The amount and quality of food has dropped dramatically, so bills are higher and we are getting less. Classico tomato sauce is a perfect example. The product is watery and flavourless compared to what it was 5 years ago.
Put that back up your butt where you got it.
Yeah, prices are up 25%, but price per unit is probably higher than that.
I just stopped buying the obvious offenders, brand loyalty only takes you so far 😊
I used to get six small bags of Doritos in a pack, but now there are five!
You probably got that product from highbury canco. It used to be heinz. (They rebranded to buck their union) I worked there.
I make my own tomato sauce now.
Living in a crazy timeline where safeway is roughly the same price as whole foods
whole foods is owned by amazon. Their 365 brand is actually price effective.
Where do you live? My wholefood is extremely expensive versus everything in the area
@@M.2000-v2g I’m in california, but I’ve lived around- seems like the price difference disappears in HCOL places but is still pronounced in lower cost metros
Only morons shop at Wholepaycheck.
safeway likes to monopolize neighborhoods.
As a former head of pricing for a major CPG company, I can tell you that perimeter items (milk, cheese, meats) have a fixed markup above cost, with grocers rarely increasing that markup (they can always decrease them to order to influence store traffic). They are much more likely to reduce # of weeks on sale (people buy rest of the store on sale about 80% of the time) or push manufacturers to shrinkflation which is much easier when you have a lot of private label goods on shelf. No gouging or secret meetings necessary as they all watch each other very carefully and usually it's the big guys that lead the market
Across the nation, grocery store markup is only 1.9% profit margin.
If everyone builds a big enough data set, then they can effectively collude by communicating via the data collection/sets. Fun.
@@neversimonAnd yet, that doesn’t mean the poster is wrong. fun.
It’s a systemic issue. No simplistic slogan or solution can fix it. You need to examine the whole system/ supply chain and find areas where it can be more cost effective.
I’m sure grocers would rather keep prices steady while reducing cost (to increase profit). So the incentives are there but perhaps a further comprehensive examination is needed.
@@CurieBohrthat was in 2019 dipshit check now
Thanks for highlighting the labour cost component. I looked at one of the big 2 grocery chains in Australia and whilst I could see an argument for "increased labour costs" being a motivating factor in raising prices (could even see an argument being made to justify preemptive price increases in the expectation of higher labour costs); I decided it was bullshit when I noticed that whilst the grocery stocker got at 5% raise after a couple years, the executives gave themselves ~20% salary raises, nevermind changes to the non-salary components.
Wages don't increase prices that much. A grocery stocker is expected to stock about 1 case per minute (including straightening the selves and breaking down boxes, and other related duties), and most cases have an average of 12 items. You could pay a grocery stocker $20 per hour and you would only need to increase the price of each item by 2.8 cents.
60 x 12 = 720 items per hour
$20 / 720 = 00.028 dollars = 2.8 cents
Obviously there are others in the supply chain, but they usually cover more product with their labor. Truckers carry hundreds thousands of items in each load, janitors clean entire sections of the store, cashiers swipe several items per second and stock or clean when they're not busy, etc.
An extra 3 cents for a bottle of ketchup is not the problem. What's really happening is businesses (both upstream and down) notice when consumers have more money and increase prices to capture it before their competitors do.
He also showed that wages increased 4%. That was on labor that was 40% of item costs. That's a total of 1.6% in total item cost due to wage increases. That's nowhere near the increase in retail prices.
It would be interesting to see a video on the food manufacturers next. I thought they were more responsible than grocery stores.
Agreed
My thoughts, too. Lots of consolidation in the mass food producers in the US.
Excellent point. The video also didnt touch on executive yeam pay. A CEO raising prices 3% and then the board giving that person a $50 mill pay raise could cause gross margins to remain flat. Then that CEO on the board of another company scratches the back of the CEO that gave him a raise. That could also explain at least some of the higher "labor" costs in the US - where the good ole boys system is the strongest it has ever been.
@@methodsignature
that 50 mil is also affected by inflation, if the margin paid to CEO's is the same before and after inflation spike, then no issue here
it just so happens that inflation is historically spiky. so it tend to spook people and claim capitalism fails. eventhough the whole point of inflation is trying to find the equilibrium with the new currency valuation drop. If anything, the fact that it's spiky. means the market corrected and find the new equilibrium extremely fast preventing a whole collapse
@@NicitoStaAna noone is worth a $50 million _raise_. That would be a strong sign of crony capitalism.
From the data I've read, the greed problems are further up the supply chain. The egg industry in the US recently lost a price fixing lawsuit, and the abattoirs profit margins have increased impressive amounts especially compared to grocery stores. My information on that may be incorrect though.
It's called defamation. Isn't happening
Well don't u remember all the chickens that had to be killed and all the places that went up in flames? Go back to 2021 and 2022 and see the millions of chickens that got sick and also the places that burned up
@@kyle6781 The was a big thing and from the farmers I talked to the testing methodology was highly suspect, but the egg price fixing had been going on for decades.
@@WAGMILLC "The was a big thing and from the farmers I talked to the testing methodology was highly suspect" - The testing methodology is fine, but they don't like the "one positive means you have to cull your whole flock" aspect of it. The problem is that it's INCREDIBLY contagious and we don't have a vaccine. The only means of prevention we have is culling the whole flock if there's even one clear positive. (Chickens catch it from wild birds. Chicken coops are not closed ecosystems.)
The testing methodology is PCR, just like our COVID testing, and it's run in state labs, usually at universities, by trained professionals. Results are reported out by machines, verified and reviewed by humans, and rerun if there's anything even remotely suspicious (like if the machine says that the sample didn't give an expected result, or the controls on a batch came out wrong.)
I never really thought that it was the grocery stores that were price gouging people but more so the companies that sell to the grocery stores, like the meat industry for example
Yea that's my thoughts on the whole thing as well.
@@YdenMk-II Why can't it be both?
@@erichsmith6668why can’t it be neither?
A couple slaughterhouses were accused of that, but it was found the price of meat simply changed in the amount of time it took for cows to go from farm to store. That's a risk that works both ways, and it's best just to just buy/sell a futures contract so you don't have to worry about it
Grocery stores are in a very competitive industry, look at Walmart and Costco, Aldi, all of these grocery stores built their name around being cheap or cost effective stores in the first places and that’s how they succeed in the market. If it is grocery store doing pricing gouging or price fixing, the increase in margin will soon attract another firm to come in and scoop up the market shares. Under most cases, I believe it is upper stream suppliers doing the price gouging rather than stores itself
Remember friends, low inflation does not mean lower prices. It means prices go up on a slower rate.
We will never undo the 25% increase in food prices. Not without deflation. Central banks work hard to make sure that never happens.
200% increase in costs since the 1990s for some things, even 400% increase in price for others (gallon of gas, for instance), and yet the average wage didn't increase proportionally. Not even close....
I remember: a gallon of gas for 1.50. Now it's $4.90 or more, for a while it was $5.90 on average for no reason. Some places it was $8/gal.
a stamp for 31 cents. Now it is, what, 47 cents? It's a stamp. Did it really cost ~24% more to make millions of the same thing? The cost to make them should have actually gone down
carton of milk? $1.49. Now it's $4.50.
Where are all these job opportunities that doubled their wages since the 90s? I'm not going to count minimum wage, because it starts off being abysmally low to the point where it's not feasible to begin with in terms of an income...yet most jobs hover around minimum wage to maybe $4-6 above it. Well, $4-6 above something like $15, is still absolute poverty pay in today's society, yet seems like 95% of all jobs pay around the same amount, which is...not enough.
Even the higher paying jobs that are trade based jobs, etc., also don't pay enough to keep up with prices of goods and services. Hmm.
Bagel fam needs that Sweet Chili Heat
I'm going to say yes, cause after they signed the Good Grocer thing the prices all of a sudden went down 30-50% at our local store. Also independent grocers have still been really cheap. For example, the small town I go to, has 1kg of oats for 3.49. If I go to superstore they want 4.99$ for the same bag of oats.
‘Our margins are tiny!’, says the industrial meat packer who just awarded himself and staff 200% bonuses increasing wage growth for the whole company by 9% with no raises on the production line.
Creative accounting is the name of the game.
That comment can be considered defamation. Remove it
@@samsonsoturian6013 I've seen a lot of your comments accusing people of defamation. Begone, shill.
@@samsonsoturian6013lol what no it cant, go read a book
@@samsonsoturian6013your comment can be regarded as ignorant, please remove it.
Idk why this comment section is full of so many weird bots getting very aggressive over comments like yours.
Yes, we need to be stricter against mergers and break up a lot of these monopolies. There needs to be more competition.
how about you don't buy at big corporations and support small businesses.
Exactly, we need to avoid letting these large centralized companies from controlling prices by creating a large centralized government to control prices. 🤔
@@jarrodmagnusson4101Not everyone lives in an aera with a local grociery. The nearest one 'near' me is about an hour drive
@@jarrodmagnusson4101you know how hard that is to do nowadays? Almost all foods and even snacks have been gobbled up by I think it was 8 major companies at major grocery stores like Kroger. No room for competition (aka: an Oligopoly)
@@jarrodmagnusson4101 Cause a lot of places don't have small businesses since Walmart drove them out subsidized by your tax dollars.
I think we should emphasize the fact that from 2007 until 2015, the price of bread was fixed to be artificially high.
Loblaws came clean (yes a rare Galen Weston W) and issued gift cards to say sorry.
But everyone elese got off without any consequences for EIGHT years!
And even then, only one company had to pay a fine, the rest haven't been punished. Maybe they're innocent?
So forgive me for not giving yet another oligopoly the benefit of the doubt.
Liars get scalped
Pretty much my take. For as much as there are a bunch of complicating factors as to why food prices are rising, and food quality is in the toilet, I don't trust the Canadian grocery corps as far as I could yeet Galen Weston's cringy ass.
to make it clear that is in Canada.
everything is like that
we just accept a certain level of it despite food being 100% essential for life
Loblaws’ gift card program was to diminish the number of consumers who could engage in a class action lawsuit, the “coming clean” was nothing other than them seeing the writing on the wall that this could not be covered up forever, and a weak attempt to encourage complacency
What about the big meat processors. The lack of competition in that space has driven a lot of the increases in Beef prices. See the FTC lawsuits
Bingo! Worth noting that even this may have less to do with corporate greed than with the insane cost of complying with federal regulations surrounding the meat packing industry. The big meat packers have basically achieved regulatory capture, then we wonder why there isn’t more competition.
Deregulation would go a long way in getting more competition in this space. Mom and pop shops can’t afford to have a full time paid usda inspector like the big boys can.
Are the regulations bad tho?
They are costly, sure , but they are there for a reason. Mostly workers ans consumers safety.
You can argue that there arw to many but i'm inclined to say "tell me specific regulations and don't just point a finger"
@@iulioh as it is in the US now. A mom and pop shop could butcher a cow without a USDA regulator onsite. But only if the consumer buys the entire cow.
If you allow people to buy individual meat cuts from them it would make it cheaper for families who can’t store a whole cow in the freezer.
@@iuliohI agree with you. It’s insane that people are still pushing that the meat industry is over-regulated there’s people actively dying from the Boar’s Head listeria outbreak due to the Trump admin’s deregulation of meat processing facilities.
What makes me skeptical of grocery giants claiming this is not on them is that I don't see the same increase in price at the local grocery store run by an independent family as I do at Loblaws. I don't know what Loblaws is doing, but it seems to me suspicious that things are more expensive at Superstore than a small-scale independent place. I mean, I'm happy to shop at my local family-run shop, but most people don't have that option, so what's happening? Are people in the cities subsidizing margins at rural locations? Is my local store just destined for bankruptcy? And like if it is that Loblaws is, for example, smoothing prices across more difficult-to-reach locations, then that's not something I'm too mad about, but as it is, they haven't said that, and I have absolutely zero reason to trust a business that has already admitted to behaving uncompetitively.
Smaller stores require less infrastructure costs and other cost additives. Take milk for example. It is in the freezer section Smaller stores need less freezer which depends on the store a small increase is added to the price and it builds up
@@Lostboy811 That is not logical at all. Economies of scale has always been a thing. Larger enterprises have lower ratios of overhead cost and "infrastructure" than smaller ones.
I'm not sure about Canada, but in the US, cities are absolutely subsidizing rural grocers, and locally owned grocers are destined for bankruptcy without government help. Like all things government, the aid is not efficient, so there's a dozen different initiatives out there supporting rural grocers, but a quick google search brought up the Health Food Financing Initiative by the USDA that provides funding for capital investment to grocers in underserved regions.
You are assuming the smaller stores are not cutting their margins and taking some loss to stay competitive
@@LionRoarTeaching i am assuming that that would not be sustainable but I did speculate that it may be that the grocery store I go to is just not turning a profit. it’s suspicious to me that things are more expensive at superstore, but that doesn’t mean there couldn’t be explanations outside of greed, just that it’s something I feel needs an explanation for me, since my understanding of economies of scale dictates a store with the market power of superstore should have lower costs per product than my local family run store.
Grocer economics is fascinating. From an external perspective, it feels crazy that labor costs weigh so heavily when it feels like every store around me is dramatically understaffed. I wonder if large grocers would benefit from shrinking their footprint and product offerings and focusing more heavily on items that sell more frequently. Some of these places have massive buildings and mostly empty parking lots - all that land must increase overhead dramatically. I've walked around some of my stores for hours out of boredom and have come to a realization that the majority of "specialty" products that fill most shelf space only have a handful of buyers in a given day. Grocers also damage out a ton of fresh product due to bureaucratic nonsense and from hiring employees who just don't get paid enough to care. It's hard to believe that endless large mergers is the answer to a system that feels filled with inefficiency.
The crazy thing is wages don't increase prices that much. A grocery stocker is expected to stock about 1 case per minute (including straightening the selves and breaking down boxes, and other related duties), and most cases have an average of 12 items. You could pay a grocery stocker $20 per hour and you would only need to increase the price of each item by 2.8 cents.
60 x 12 = 720 items per hour
$20 / 720 = 00.028 dollars = 2.8 cents
Obviously there are others in the supply chain, but they usually cover more product with their labor. Truckers carry hundreds thousands of items in each load, janitors clean entire sections of the store, cashiers swipe several items per second and stock or clean when they're not busy, etc.
An extra 3 cents for a bottle of ketchup is not the problem. What's really happening is businesses (both upstream and down) notice when consumers have more money and increase prices to capture it before their competitors do.
Over 4 years, I’ve watched the price of eggs vary drastically week by week. Seemingly, the price is always substantially higher when stock is low towards the end of the week. I’m talking 30-50% increase depending on the day. This didn’t happen prior to COVID so it’s awfully suspect to me. Each week I have to check if eggs are affordable or if I’ll have to come back later. Something odd is going on. Although it has been primarily specific to eggs.
Eggs and milk seems to have very variable price, my guess is that they are very low margin items and they follow the market while processed food have bigger margin and can assorbe some loss for a period before needing a price increase.
@@iuliohMilk prices are extremely stable in the US. Eggs not so much.
Bird flu’s been a piece of it
A conspiracy to make the price of eggs be more volatile makes no sense... There's no advantage to the suppliers in that. It'd just be fixed a at some high value like $5 for a dozen and not fluctuate at all. I think a lot of the volatility has to do with supply fluctuating depending on flock health and all that, yet demand being pretty inelastic. A lot of people are buying eggs no matter what they cost because it's a basic staple they always keep around.
@@bubba99009so never mind the fact that one producer (Cal-Maine) controls roughly 20% of the egg market in the US?
Most balanced and informative video I've seen on this topic.
Thanks for laying out the complexities of the situation.
What about private equity group raiding? Where private equity groups take ownership of a company, buy all its assets, and then rent those assets back to them as a form of wealtg extraction. Allowing the company to report razor thin margins no matter the money brought in. Aka the gross margin doesn't change but the private equity group makes bank.
If you follow a loaf a bread, it goes into the food conglomerate costing like 32cent and comes out costing a ton, and being the same.
Didn't you see his other video on private equity groups? They're actually really nice guys who don't actually control anything. People just blame billionaires and megacorporations for problems they have nothing to do with! I'm sure glad we have this dude to tell us the truth.
Right on, my good man! Please continue your good work of providing economic education to a population that sorely needs it.
My problem with the "corporate greed" explanation is that corporations didn't just suddenly decide to become greedy in the last few years (it's not like they weren't before). Nor could a corporation single-handedly increase their profit margins when people can buy a product elsewhere or buy a different product. So blaming price increases on corporate greed doesn't actually explain what's going on. And making policy based on an inaccurate picture is unlikely to produce good outcomes.
So, where is this "extra" money we're paying for going exactly? Groceries are up 25%, and like you said, the margin for supermarkets is like 3%, so it's not them. Same thing for other links in the supply chain, none of them have particularly high margins. I know salaries in general are up, but is that really the whole story? Or where else does the money go?
The commodity price graph shown answers a lot of that
Wages have increased more than inflation, especially for low paid and entry level work, and wages are a key price input for any retail setting.
@lucaspm98
The minimum wage is still under 8 dollars for a lot of the nation, so you're speaking bullshit.
Inflation outpaced that over a decade ago.
@@Seth9809 the minimum wage is irrelevant, no one is making that anymore. Even fast food places in low cost of living areas pay significantly over minimum wage and are desperate for employees.
Per the FED and countless other sources wage have risen significantly more than inflation since 2020, with all of those gains going to blue collar and service (generally low income) workers. White collar (high paid) salaries are flat to down with pressures from AI.
Has that reversed decades of wage stagnation? Absolutely not. But it’s a real, like primary, driver in increased grocery and fast food prices that are closely tied to service worker wages.
When in doubt, always blame wages. Remember, workers should be poor and there is absolutely no way to run a business without exploiting the people who work for you. Also we reported record profits again this year!!! (But please pity us. Workers are ruining business)
Fellow Canadian here. Thanks for the analysis. I always thought supply/demand forces were more likely to explain the increases than price gouging, so I'm not surprised to see their profit margins aren't crazy high like some would believe. Regardless, I don't like Galen Weston so Loblaws can eat my $1.50 hotdog I'm a Costco lifer now
You don't have to "believe" anything about margins because for a public company that information is freely available. Unless you want to take the conspiracy theory to another level and claim that they're also manipulating their accounting to understate profit 😂
@@cavemanstyle1376 What exactly do you think corporate accounting is for?
Their goal is literally to reduce income as much as possible.
@@2639theboss Corporate accounting has two jobs. Report as small of a taxable profit as possible, and report as big of a profit to shareholders as possible. For both tasks there are generally accepted accounting principles and there is creative accounting. But if there is price gouging, it would definitely show up
@@cavemanstyle1376 Obviously, 99% of people don't look at figures for grocery store margins. That's where "belief" comes into it--they don't even check the facts, but make assumptions that fit their world view.
Would love to see a deeper dive into specific grocery companies. I looked at the margins for target and they had a rise of about 3% gross margins during Covid which have mostly gone down. However it was my first time diving into the different margins and this video helped explain more of those.
Accessibility request: charts like @6:47 for a person without colour sensitivities are 80% broken if the order of the legend doesn't line up with where the lines charted either start or end. At least if ordered by by the ending positions even colour blind folk could gain everything from this chart instead of only see dots, dashes, and solid lines.
Or colour selection could maybe work too, not sure though because I'm not even fully blind but still can't tell lol 😅
If you're looking for ways to improve that'd be an easy one to write as a script, that's all, not a big deal.
Thanks for all the hard work, love this channel.
People who aren't subscribed are doing themselves a disservice.
I appreciate the analytical, factual approach to complex issues. Thanks for informing me more on the issue!
Well my assumption (before watching the video) was that prices have gone up way beyond the inflation rates reported. On top of that, at least for chains in Canada, their profits have been better than ever. This makes me think that not only are they off-putting costs onto consumers, but also they are trying to squeeze as much as they can.
Let’s see how my assumptions compare to what you bring to the table Richard. Thanks for sharing!
Absolutely agree. And I shop Aldi. That said, my loyalty is eroding.
Imagine your money is increasingly getting devalued and you have to budget for the next whole year, trying to keep your profit margin stable. It's impossible to predict future prices, so companies just guess... So for better or worse, this uncertainty will impact prices as well. Expected inflation is almost as bad as real inflation, as you lose the value anchoring and lose faith on the currency.
Not all CPI goods inflate equally. The stated inflation rate is just the average of them all. Food and gas were the largest contributors to inflation so the overall economic inflation rate would have to be lower in comparison.
@@toyguy112183No, they love to remove food from the “core” inflation because of how much it fluctuates. In other words, you’re being gaslit by the government.
@@gustavobuquera yea, we need a hard reset.
Currently visiting Brooklyn, NY...walked around (September 19th) and wound up in DUMBO. I purchased one muffin and 4 scoops of ice cream in a cup (treated my nephew to 2, 2 for myself, both scoops only in a cup and NOT a cone). $29. Let me repeat: ONE muffin. FOUR scoops of ice cream. $29. Another day: purchased 3 apples, 3 pears, 3 nectarines at a grocery store. $19. Reminder: Salaries are still $15/hr. in NY and US federal minimum wage in 2024 is still $7.25/hr.
“Its only greed when the other guy does it”-Milton Friedman
the other guy being big oil?
@@snowballeffect7812Anyone, any company
@@snowballeffect7812 no. it means, when companies raise prices we are all quick to call them greedy terrible people. but when we sell our houses and try to get the best price we can from them, thats just a fair market price. everyone is greedy.
@@thomasfoltin3832 maybe you call them different things, but I don't. NIMBYism is primarily a response to try and keep housing prices artificially high for owners and is accurately called out as greed by most people who criticize. and it's simply a matter of fact (which the oil companies have admitted to) that they artificially increased prices simply because they could. Providing excuses for them like 'everyone does it' is not valid and does not lead to any solution, either.
@@thomasfoltin3832 they literally admitted on national television that they raised prices by artificially limiting supply because they could lol.
conflating market prices with price fixing and cartel activity is invalid.
I think it's mostly inflation but also some greed. When the general public thinks there is a lot of inflation that gives all the stores an excuse to raise prices at once while still competing on certain products with sales, etc. to get people into their particular stores. Then as their costs do rise they do have to increase prices while trying to stay competitive. In any case it's more complex than a store just charging a fixed markup based on their cost.
It's the same with layoffs and recessions. Once enough people start talking about a recession coming, businesses use it as an excuse to start doing layoffs without signaling that they are having problems unique to themselves, which in turn creates a recession or makes the inevitable recession worse.
Some companies that were already struggling and had to close stores in California conveniently used that to blame the minimum wage increases. On the other hand, things like interest rate increases and wage increases can cause a company that was teetering to tip over so they'd be technically right.
@@sor3999 They had a lot of different problems going on including out of control crime due to the lax laws on shoplifting. Raising minimum wage doesn't help there either. There is only so much people are willing to pay for a good or service and if you can't meet that price at cost that leaves room for profit it's no longer a viable business.
The greedy bastards are the ones accusing everyone else of price gouging. They want post-inflation wages and pre-inflation prices.
I thought the price gouging wasn’t a problem with grocery stores, but with the companies behind the products.
Neither
neither grocery stores nor companies control the supply of money, and the supply of money is the primary factor of inflation. i will leave you to figure out what entity controls the supply of money and what decisions have been made affecting it.
@@IndexInvestingWithColeHe means who’s being blamed.
@@j.reinholmepeople over profits led to massive profits…
@@j.reinholme Are you or anyone you know receiving any portion from this "supply of money"? I am honestly just beyond shocked that people still talk about money supply when discussing these issues. 1. It's dumb and makes zero sense. How is "money supply" causing price increases? Who is spending this money and allowing it to get into the economy and cause havoc? 2. Why do corporations argue that they are legally required to charge as much as possible in order to fulfill shareholders requirements and stay inline with the law? Wouldn't that be a strange stance to take if they were attempting to keep prices as low as possible? Nothing you said would make sense to someone with a child's ability to use logic. Let me know who has access to this money supply and continues spending it so we can finally fix inflation! Thanks!
Economic illiteracy is a big problem. So many people just think "inflation is X, so if the price goes up more than X its price gouging" as if different products dont have different costs that are affected by different factors. One of the most damaging things you can do to an economy is to start acting like prices are arbitrary and not a reflection of the total market around them
I would be more interested in diving more into the food processing industry. I feel grocery stores are naturally a more competitive market, and thus, not likely a place you would find significant “greedflation.”
Historically and recently as well, meat packing has been more of a sector where corporate consolidation is rife, meaning you’ll likely see more anti-consumer behavior in that fragment of the industry.
Unfortunately it is much easier for politicians to sloganeer and I cant imagine most people understand the masterclass you put on equity value. Great content, keep up the good work!
Blaming price increases on company greed today implies that they were less greedy yesterday; that's obviously nonsense. Companies always operate at maximum greed, all the time. Greed did not change in the last few years; moronic economic and monetary policy from governments around the world did. Any politician who says otherwise, is trying to distract from their own failures and insulting your intelligence.
Then explain why there are investigations into price fixing in multiple items? Explain why oil producers in the US have tapered off supply?
@@Seth9809 Well, obviously in order to insult someone's intelligence, there must be intelligence to be had.
Greed may not change, but the opportunity to express it has. The excuse of covid let the genie out, and now it's a race to see how high they can go before people sic the government on them.
@@RandomHandle120 Not sure if you're insulting yourself. What explains outside policy which resulted in 33% increase in shareholder distributions (Loblaws, 2022)? Coincidently, their stock more than doubled since then.
What a well-measured and thoughtful analysis. Thank you for sharing the data as well as your conclusions!
Politicians are always looking for someone else to blame.
That and Karens at Walmart
Not only do we have inflation but we also have shrinkflation at the same time. Pre covid i could get a pack of 28 jalapeño cheese sticks for 6.99$. I now get 21 for 9.99$.
in the next video around this topic, I think it be good to pick 5 main staples of food. And cover the main companies/competitors in that space who sell to the grocery stores, and look at their operating costs and margin. A'int no way in hell eggs and milk and cheese and bread and meat aren't being absolutely price gouged to all shit.
I think it’s that the market has actually inflated by a lot more than was reported. Houses increased by a lot more than 2% per year. It was contained in assets like stocks and houses at first but it’s slowly leaking into the everyday goods as well.
This really doesn't feel like it paints an accurate picture. It's one thing to blame commodities prices but there should be a balancing deflating factor when they drop again in that case. Instead we only have 'stable' inflation now, 'normal' gouging instead of 'extraordinary'.
Something missing from your data is the timing of wage hikes vs cost increases, since it is taking both as a result of a multi-year window. It would only make sense that after a price gouge (which can only be for a shorter period before it becomes untenable for the market) there's a regression back to the mean in the profits, because they have to raise wages due to gouging past what people can afford. The important factor is not how much profits are up over five years ago, but that they are still up.
One thing that annoys me is that it is always the consumer that's expected to take the hit when things go wrong in the economy. I saw an interview with a landlady a while back who "had to" increase rent by 9% because her mortgage had become more expensive. But the reality is she didn't have to. As the richer person in the transaction, she could have absorbed the costs herself, maybe gone on one less holiday this year, or forgone that new car. But no, instead, her much poorer tenant was expected to pay for her financial risk, presumably by forgoing avocado toast and Starbucks.
And I think that's what makes people angry. The supermarket's profits are "only up by X%," so it's not them that's responsible for the huge price increases. But why should they be up at all? If they have a huge increase in costs, why should their profits not be down? Don't get me wrong, I know the answer to this question, but the point is that people are a bit fed up of living in a system when no matter how badly the economy is going, the people at the top always make sure they get paid out first.
100% agree.
Profits can be up while profit margins can be down. The secret is volume. A smaller portion of a larger pie can be larger than a larger portion of a small pie, the portions being profit margins and the pies being volume.
You shouldn't even be allowed to rent/lease out property you have mortgaged, you should be the owner free and clear. I recall a story during covid about a landlord in New York who temporarily suspended rent payments because he actually owned the property he was renting.
@@uncreativename9936 That kind of thinking will mean that the only people who would be able to run apartment complexes would be ultra wealthy enough to finance the construction and purchasing of apartment complexes using their own cash. This would drastically reduce housing as well as any business space that has a mortgage.
@@ErbBetaPatched nah because the bank could just own the property and hire a property manager to run it. Similarly investers can just pool their money together to build the property and hire a manager to run it. That's how the townhouse I live in is and unlike the rest of the area, we haven't had rent increases in the past 3 years that I've been living here.
I appreciate your level headed, data driven takes. Keep being a reasonable voice! :)
The layman says "grocery store" but you should be wise enough to know they actually mean kraft Heinz and Purdues margins, not krogers
FR...
actually they do mean, see loblaws boycott in canada
Walmart is the biggest so they get all the hate
@@samsonsoturian6013 in the us maybe, in canada its all loblaws. walmart treats its employees like crap but the prices match that
@@samsonsoturian6013Walmart actually started pushing back on food manufacturers who kept raising their prices arbitrarily and other grocery stores followed Walmarts lead.
Thank you for shedding light on a very complex subject.
they could also be price gouging but paying management and C suite more which would keep their margin lower
Definitely possible, albeit the Loblaws CEO took a big pay cut during the pandemic (I believe his salary was cut in half). Executive compensation, while absurdly high, is still a relatively small cost when compared to their revenues.
Great video! Keep up the great work! Love the level headedness approach.
for q1 2023 pepsico reported 14% revenue change while volume only changed 1%. i think it is clear this is pretty clear example of seller's inflation or "greedflation".
Well that's evidence of price inflation, but doesn't really tell us what's driven the price inflation. Did Pepsico start charging a bigger mark up, or did they charge higher prices because they were paying higher for their inputs? Their net income margin was pretty range bound during the pandemic
Revenue, isn't profit. What about their expenses? Did you look at those?
Appreciate the nuanced take on this as always. While it seems true that grocery stores being greedy isn't a major contributor of inflation, this isn't the only business who makes money off groceries. For example, if a supplier raises the cost of a bag of chips from $3 to $4, and the grocery store then passes that cost along to the customer, the grocery store won't increase their profit, but the supplier would. So this could be an example of greedflation not considered by the video. Though with the many suppliers out there, this would take parsing a lot more data.
Grocery stores have extremely low profit margins, prices are mostly set by manufacturers.
Maybe it's a bit of of a weird way of analyzing the situation, but I feel like the best metric to use here is to simply compare price increases in the grocery industry to Costco by itself. Costco methodically prices their goods such that sales revenue only covers operating costs, and they leave only membership revenue as their profit. This business model gives us a very transparent look into market conditions for the industry as a whole. If price increases for individual stores or broader averages for the whole market track similarly to what you see at Costco, it's a good indication that any price increases are tied very closely to increased costs and not to increased profits and greedflation. If there is ever a true market wide price gouging situation going on, Costco will become a stark outlier in food prices and you will see hordes of people descending on those warehouses like it's that movie World War Z. And that's simply not the case at the moment. Prices at Costco are increasing just as a much as elsewhere. Costco is still just a moderate per unit discount, largely attributable to small volume discounts. Egg prices are way up there, pasta sauce is way up there, chicken is way up there (except the legendary rotisserie chicken of course), everything is way up there just like everywhere else. So I'm pretty confident in assuming that other stores are engaged in little to no price gouging or greedflation, and the price increases we're seeing are due to rising costs of doing business.
Question - Do any of the metrics shown show if a business is funneling more of it's money towards things like executive compensation? Maybe the overall profit hasn't increased because labor costs have gone up, but how much of that 'labor' is people already earning six figures? (or more?)
Good question - no, that's not directly accounted for by these metrics, but at least for Loblaw's case it's worth noting that the executives took a big pay cut during peak inflation. Executive compensation is also still a relatively small cost when compared to company revenues.
A lot of these are public companies, look it up. Even so, why would thousands of bosses who are competing with each other spontaneously do that?
"Cannot see the misdeed forest through all the data trees"! Glad that someone pointed-out the Shrinkflation surge by grocery producers. Then there's "Price over Volume", where retailers deliberately do not restock available items, thus reducing inventory costs increasing profits, yet overall prices go up for us. I observed this, when I would go over to a competing nat'l brand grocer and would see the "disappeared" items there, plentiful & even on sale. Then of course, there would be "missing" items at the latter, available back at the former store! And back & forth, on & on.
Great analysis. I was wondering how is it possible for grocery stores to have any price gauging seeing how low their net profit margins are (3.5% for loblaws and 2.4% for empire ltd) . Like you said there are so many reasons behind the price increase, so I really despise the politicians who uses the half truth to gain supports, which will lead to resources being wasted to solve the wrong problems.
If by “analysis” you mean “shilling for large corporations”, then yeah this guy is spot on.
@@Shredderbox sorry the facts and data don't support your political ideology buddy
@@IntuitivelyCuriousHe addressed price gouging which would show up in profits. Stores need to buy thier products from manufacturers. Tough to analyze manufacturers since product mix changes over time.
Do you have any evidence that he is "shilling" for big corporations? Because The Plain Bagel has generally been very even-handed on most topics.
Or have you already made up your mind, and will discard any evidence that doesn't fit your worldview?
@@Shredderboxpersonally havent seen the HUGE increase.. Yes is up, but not crazy amount. Maybe we dont buy a lot of processed food.
I would've liked to see more of a deep dive video, going into specific categories and why they're inflated, whether it's due to profiteering or actual inflation. There are several monopolies in the US on things like meat, which are only controlled by 4 companies. They have definitely been price fixing. McDonalds prices are way too high, the company has committed to scaling back prices because they're profiteering so much they're losing sales.
A stable society has access to affordable healthy food. The issue needs to be addressed regardless of the cause.
"Affordable" is relative. Some people have the means, some don't.
@@maxweinbach3996 ok… is this comment meant to deconstruct my argument or something? It doesn’t. Addressing affordability of quality food is something governments do to maintain a stable society. If we look at parts of the US New Deal which only addressed availability of food and caused nutrient deficiencies and new diseases, it was the lack of access to food by a large part of the population that was of concern to politicians at the time. When pricing exceeds affordability for many it makes sense that politicians are now trying to identify what is the problem so that they can fix it. If you are wondering why politicians are concerned about this issue it isn’t just about elections. Historical evidence shows that many countries in history had their governments overturned during times of strife where food was a contributing factor. We can look at the buildup to WW1 and WW2 as examples of what caused governments to be overturned.
I thought it was food processing and food manufacturing that were price gouging retail, who then cut a little profit for themselves when selling to consumers.
IMO, this question needs more analysis from farm to market to retail, not just retail to table.
I do appreciate this take tho! Retail is just as unprofitable as ever, and is getting shit on more by the public. You're doing something to help fix that!
This was really well-researched and thoughtful. Here in the US the big grocery chains are struggling & trying to consolidate further (Albertsons & Kroger) because the margins are only getting tighter. I think price controls are dubious but agree that tighter regulations on the upstream cost spikes & volatility in food availability may be beneficial in a more fragile world.
It's the food manufacturers. The retail side is fairly reasonable.
Kroger? The company with a CEO that was caught on tape admitting they were raising prices above inflation? That Kroger?
@@Shredderbox still not evidence of price gouging. It's a soundbyte for the uneducated.
Thanks for being consistent and telling us facts we might not want to hear.
I really don't believe the inflation numbers my costco pack of chicken 2.5x in price between pre COVID and post COVID.
The grocery chains brought it upon themselves. if there's a villain, it's likely their wholesale suppliers, who can raise prices at will forcing stores to pass it on, but their existence is invisible to the consumer, who blames the retail stores. That's what drove up the cost of restaurant food, first, before wages ever moved. But some clown in the grocery business made a boast in an earnings call about the pandemic situation being a "once in a lifetime opportunity to raise prices" and I don't think they expect those calls to be heard, but they are.
Greedflation is real. Are the grocery stores at fault... Maybe a little but probably not a big part of it. As seen in this video. MOST of it is the suppliers selling to grocery stores. And yes that get grey and complex FAST. But it would be worth realizing that as much as I do NOT want to give grocery stores a pass..... They mostly get a pass, it's the supplies (Hello Kellogg, JBS, etc) that are price gouging.
This video actually demonstrates the opposite--that it's NOT a case of grocery store greed (at least in the US).
Its only real in the heads of democrats who got their updated programming just a month ago.
I can't believe grocery stores JUST NOW figured out they could raise prices, and we'd all still buy it! Almost like that's not the issue at all, and the left wing talking points make no sense.
I wish I could see a similar analysis of grocery stores in Finland because we have effectively only three grocery store chains here and the price of groceries skyrocketed during the pandemic
"Due to competition, price gouging isn't possible." We'd have to ask the housing market about that.
Sure. Definitely not due to keeping interest rates too low for too long, or restricting the housing supply for decades...nope...none of that.
@@timheinrich3752or demand shooting way up due to institutional investment and Airbnb rentals.
Hey, you know, you should ask Richard about REITs and their recent increase in popularity.
Housing's different though, it's not truly one market, it's many. Like there are affordable houses for sale in Kansas and Michigan. That does me no good, and doesn't figure into my decisionmaking locally.
Pay your rent you bum
Most F&B companies were running near record low inventories coming out of 2019/2020, as the massive spike in demand during lockdown cleaned us out. That’s why free cash flow spiked, then came back down when demand came back down to historical levels. I’m surprised you didn’t look at commodities like soybean oil, wheat & sugar, which all skyrocketed and for the most part stayed that way for 3 years.
Intense competition ? There's 3 to 4 companies hoarding the vast majority of everything food related in the states.
It depends on where you are. Some states have more variety in grocery stores than others.
In my typical American suburb I have 5 national grocery chains, 2 high end specialty grocers, 3 ethnic grocers, 4 same day delivery online grocers, 2 dollar stores, 3 big box stores, 2 membership clubs, and 2 pharmacy convenience stores within a 15 minute drive of my home. I could source 75%+ of my typical grocery needs at any of these stores.
You might have an argument in rare rural areas that may only be serviced by delivery, Walmart, and /or dollar stores.
There are about a dozen companies who own practically all of the grocery stores in the US and Canada, some more than others - for example Albertsons also owns Pavilions, Safeway, Vons, and over a dozen other chains I haven’t heard of; while Kroger owns Food 4 Less, Fred Meyer, Ralphs, Smith’s, and over a dozen more.
As for food _production,_ Business Insider published an infographic several years ago showing how 10 companies control almost every large food and beverage brand in the world: Nestlé, Pepsico, Coca-Cola, Unilever, Danone, General Mills, Kellog’s, Mars, Associated British Foods, and Mondelez.
@@lucaspm98 Look at who's owning these chains and look at who's providing the products. I don't think you understand the concept.
In the UK, the arrival of the German discounters Aldi and Lidl absolutely changed the industry and made it a lot more competitive. Whenever there's a spike in food prices they see a surge in customers. Many people still prefer to shop in the more mainstream supermarkets, Tesco, Morrisons, Sainsbury's, Asda etc. most of the time, but if pinched will shift down to these two (and the ones already shopping there end up at Heron Foods or Farmfoods which are honestly only a short step up from a food bank). They're not bad in terms of quality, but selection is more limited with far fewer SKU's.
Ok, so grocery store's aren't robbing us blind. How about the Lay's potato chip company themselves that sell the food to the grocery store? Why didn't you just go one layer back and see if THEY are having insane profits?
Yeah the grocery store might not be gouging, but someone sure is.
Don't be silly. Look at off-brand milk. The price perfectly matches inflation because the stores sell it at break even prices to keep customers coming back every week. Some products are also effected by sanctions, like how England blacklisted Russian gas so now other markets have to compete with England for gas. Other products are effected by one-off events like that plague among chickens when a lot of consumers straight up refused to stop eating eggs for breakfast even if they had to drive an hour to get it.
It's mentioned very briefly in the video, but even food manufacturers didn't see any meaningful movements in profit margins> Lays is owned by Frito-Lay, who is owned by Pepsico. Pepsico's gross margin/net income margin were 55.4%/10.9% in 2019. In 2022, they were 53.3%/10.3%
@@ThePlainBagel Thanks for the info sir! Appreciate the follow up
When companies get up to shifty stuff they generally have to agree with eachother to do so, which would inevitably result in a leak or snitch going to the gov and blowing the whistle (see Diesel Emissions Scandal).
Always good to keep an eye on companies, especially in a place like Canada where there is more power in smaller groups.
I had no idea businesses just started becoming greedy in 2020 🤔🤔
That's how you know people are lying about greedflation. If the bosses are greedy now, then they will have always been greedy.
@@samsonsoturian6013 Yea and it's their job to be greedy... that is their motive to be in business at all. I don't understand how people think the greed turns on and off depending on what party is in control and needs the excuse to cover for their horrible policies and grab even more power.
The point is that inflation was much higher on 2020, but food costs rose above inflation. Way to miss the point.
Politicians only now blaming retailers to channel public hatred elsewhere. Supermarket chains formed monopolies, dictating price with farmer and jacking up prices for a long time. It’s not as big of a problem in the US depending on the region but definitely not new.
@@MaryamMaqdisi inflation didn't go crazy until mid 2021. Not 2020.
You can always count on Richard to bring a rational, well-researched analysis to highly relevant topics of the day. This (among other reasons) is why I continue to subscribe to his channel :-) !
How can grocery stores price gouge with a 1.6% profit margin?????
Because greed knows no social bariers. Some customers want post-inflation wages and pre-inflation prices
They make up expenses. That's how movies make a billion dollars and are somehow run at a loss.
@@Seth9809Or, they do actually have expenses that high?
For an example of unreasonable food price inflation, look at high margin snack foods. Things like soda/pop, potato chips, and chocolate bars are very high margin items, even for retailers. The input costs are a small fraction of retail prices. Yet from 2019 to 2023, pop prices rose 59% and sales rose 56%, yet unit volume fell by 2%. The increase in sales is entirely attributable to increase in price, not an increase in volumes. This is a consistent 15% YoY increase in prices! None of that had anything to do with the pandemic, as the prices, sales, and volumes are nearly straight lines throughout 2019-2023. This is entirely price gouging. To be clear, these increases aren't from the grocery stores, but from producers like Coke, Pepsico, and Keurig Dr. Pepper. Grocery stores and labor costs are both scapegoats for greed from the suppliers' side.
People think prices going up has to be greed because they assume hard times and things going wrong could never happen, so more expensive food must be evil intent
I think people question rise of costs at the same time more money distributed to shareholders.
I really appreciate your measured approach. It just always gets me that these companies report record profits every year, and corporate compensation keeps ballooning, but we're supposed to believe they're not actually making more money? Idk. Blaming cashiers and stockers makes me extra suspicious (not saying you're doing that).
While testifying to a Federal Trade Commission attorney Tuesday (court hearing for Kroger's intent to acquire competitor Albertsons), Kroger's Senior Director for Pricing Andy Groff said the grocery giant had raised prices for eggs and milk beyond inflation levels. As the old saying goes, "Never let a good crisis go to waste."
Egg prices went up more than nominal inflation because of widespread bird flu which decreased the supply of eggs to the market. Your statement is true but highly misleading.
Inflation doesnt mean the price of everything goes up the same
Inflation should mean prices go up the same, because it's all paid for using the same devalued currency. Any extra price increases is shortages or greed.
@@Seth9809 That's just not how prices work.
You very clearly don't know how business works. @@Seth9809
I think part of the problem is economic whatevs are looking at industry wide averages but consumers are looking at what they actually buy. And price changes for individual specific items from the same brands over time have been wild. Pretty much nothing has gone down in price, many things have gone up by some smaller percentage that can be explained by inflation yada yada, then you get really specific items that have gone up by 50% or 100% over the last 10 years or even just since the pandemic. And when consumers suddenly couldn’t afford their usual grocery habits, looking at the prices of those specific items was very mind blowing and sometimes upsetting. I’ve been doing online ordering from a local grocery shop for a number of years, so when my grocery bills were up by ~40% I was able to compare prices pre-pandemic and it was only like 8 common items that had really shot up, but they were ones I bought frequently. Once I switched to different brands or cut out the item entirely, the increase was more like 10% over pre-pandemic. Like a vegan mayonnaise had gone from $6.99 for a big jar to $12.99 for a jar half the size. And amusingly, now that specific item is back down to below $10, but I will not start buying it again because I’m petty and also have no time in my life to babysit the prices on items to see how the manufacturer is feeling about their hold on people that month. Anyway, yeah, that’s greedflation. A large percentage increase that’s so optional they can change their minds about it a year later when people stop buying the product. But so many manufacturers did it with their popular/trendy products in a short span that it’s become synonymous with the whole industry.
I mean eggs is the worst example you couldve used, because that is the item where in the US there is significant market concentration and ridiculous price increases that are no way proportional to supply chain issues. Kroger's senior director literally admitted to raising egg and milk prices way above inflation recently in an anti-trust lawsuit
Prices increasing faster than inflation is not evidence of price gouging.
@@IntuitivelyCurious I think that when you combine it with record profits, the picture is pretty clear. The point is that they made a choice beyond supply chain problems. Also, the video doesnt look at the entire product chain. If retailer, producer, packiger, and transporter all add some extra and load it off on the consumer, the picture becomes different.
Btw, no one is say that there shouldnt have been any inflation at all, just that its worse than it shouldve been
The price of eggs was mostly effected by chicken plagues, and if you call that price gouging I will dox you for lying.
Milk prices are surprisingly low. You can easily get a gallon of milk for less than $3 right now (depending on region and store I am sure). Egg prices are super high right now but they are always extremely volatile which is why you can't really look at one or two items. I see fluctuation of hundreds of percent in price on eggs which would be indicative of a healthy market with plenty of competition. If somebody was setting the price in a smoke filled room why would the price ever fall dramatically? It would be relatively consistent at a high level.
Egg companies last year got sued for price gouging through the 2000s. They have to pay millions of dollars in fines.
Inflation from central bank money printing is to blame. Grocery stores make tiny margins
Food inflation might be crazy, but at least Bagel stayed the same.
Hooray for remaining consistent in his shilling for large corporations. 🙄
@@Shredderboxor stop complaining and grow your own food
In Australia our enquiry into the supermarket duopoly found they use their market power to suppress the prices their suppliers (Australian farmers) are able to negotiate. Much needed interventions in the space might further increase the prices consumers pay for goods!
All to say, expanded margins might be on the supplier side too, not just the consumer side. Any government intervention with the aim of keeping grocery prices low might look more like a subsidy for essential foods - either payments to producers, or exempting some products like vegetables, bread, milk etc from GST/VAT.
Sure the workers want fair pay, but how about the CEOs' desire to fly private? We gotta protect those precious fragile CEOs from our plebean airports at all cost!
If you should be fortunate enough (via your incredible skillset, talents, knowledge, education, networking abilities, etc) to become a CEO, you may come to realize that how they spend their time is incredibly important to the success of their corporation and that it makes sense for them to fly efficiently. You think a CEO doesn't make a difference? Look at what Steve Jobs did with Apple (it was 6 months from being bankrupt. He turned it around and made it the highest market cap co in the world) - +v example. Or Mike Zafirovski, CEO of Nortel, who couldn't even convince the Canadian government to bail out what was Canada's #1 high tech company, and via his incompetence declared bankruptcy at about the worst possible time possible - -ve ex. CEO's can make a huge difference, either positive or negative. Quit griping about privilege and get there yourself if you think flying private is so important.
Per your sources, its not the grocerers, but rather their suppliers, who're responsible for the hikes in prices. This is by and large what people were saying prior to the politicization of the issue into a generalized and simplified "grocery stores bad", but data in a digestible video helps get the discourse on the subject back on track.
Exactly. Have to investigate the companies producing the products not the distributor.
Wtf they mean they had to take losses to get people into the store?? "Inflation is high so I'm not going to eat this year"- said no one. Who quit grocery shopping?? They returned to hunter gathering or something 🤯
This was a welcome analysis. I wonder how much of an effect gasoline prices have on this situation. In Canada, we also had the carbon tax go up during you-know-when. And I would expect that it's a lot more expensive to import foods nowadays, so that too could have an impact on the prices.
I think it's the companies behind the products, instead of the grocery stores for such historical increase in prices.
It might be that they assume that customers have gotten accustomed to shrinkflation so they never stopped doing it
I understand there’s a lot of nuance to this and actually lots of factors to the inflation of groceries, but price gouging is still one factor. Punishing price gouging won’t completely resolve inflation, but it should be one part of the solution. There was just a news report of how Kroger inflated the price of eggs and milk beyond their input costs. And they even admitted that they did it in court
A Krouger's executive literally just admitted they price gouged. Other grocers are smart enough to still do it and not say the quiet part out loud.
¯\_(ツ)_/¯
Thanks. To me it just seems like basic arithmetic and logic can clearly show that they're not price gouging. As you said, their margins are paper thin. so assume you have an operating profit margin of 3%, that means if they jacked up prices by 3 points ahead of costs you would see margins increase to 6%, or a doubling of profit per dollar of sales. So when you consider that it becomes impossible to argue price gouging, because you'd see profits up hundreds of percent with a 25% increase in prices, and obviously we aren't seeing that. It's scary that policy makers want to regulate business but don't understand something as basic as operating leverage.
The thing is, the cost of groceries have actually almost DOUBLED near me. (in USD, all the same brand, from the same stores)
Kroger store-brand tortilla chips: Were 1.25 in 2021, now is 1.99
Kroger 30.5oz can of coffee: 2021 was 5.99, now is 9.99
Store-brand 4lb bag of sugar was 2.09, now is 3.59
10oz Frozen bell peppers were 99 cents, now are 1.99
1.15 for 12-pack store-brand eggs, now it's 2.30
3.49 for a pound of lunch meat is now 5 bucks
Tampico punch went from 1.59 to 2.99
Pasta went from 1.00 to 1.49.
Ramen went from 25 cents a pack to 40 cents a pack.
Quick oats 42oz went from 2.79 tio 4.59
Soymilk went from 2.79 to 3.99
Vegetable oil went from 2.29 to 5 bucks!
The same types of increases can be seen in bagels, cup ramen, bread, Crackers, sweetener, sausage, frozen pizza, cereal, fruits and veg, onions, ground turkey, canned veg and beans, soda, saltines, and so, so many more.
If you want me to believe there is a legitimate reason the cost of my grocery bill has basically doubled in the past 2 years, you're gonna be fighting an uphill battle, because these prices are BS.
40% of our dollars, were printed in the last year alone.
If you look at the net margins from farm to plate it would seem the final processing step garners net margins of 20% while the retail food net margins remain under 3.5%. So where do they try to squeeze - food retailers - LOL
It’s not the grocery stores it’s the earlier suppliers and distributors that are actually gouging the prices to make up for their losses during the pandemic because they couldn’t accept the sunk cost. Many farmers had to waste a lot of their crops during the lockdowns and are trying to make their money back. I work for the institutional clients division for wealth management and some of our clients are grocery store owners, the profit margins on their businesses are very low!
Gov shuts down everything and gives money to people spend... Price goes up. *Pikachu face*
Another considerable detail for the impact is that stocks had been purchased at lower prices for many of these companies, then adjusted for inflation on sales. This is a "fortunate" trade for them. nothing ilegal or wrong. Plus expected inflation is something that plays a big role too, while budgeting during a growing inflation period, you can't precisely predict the future prices that will break even, so uncertainty makes price as well, for better or worse.
The only 100% sure thing is that populist politicians will NEVER accept the blame.
Love the analysis! Would you kindly do the same analysis for the supermarket industries in australia and new zealand?
I shop at a small grocery chain, prices are half of Loblaw's. Loblaw's are having record profits, so yes price gouging is a thing.
Half? I'm calling bullshit
What an incredibly simplistic and ignorant take
@@Alex-vq8fu That will be your little secret.
It would be interesting to look at the margins and profits of the grocery distribution arms of the same companies.
What i take away from this is that the US has surprisingly high competition. Thats very un-US like. Needs more Mergers.
While I think food prices are absurd. Lower fuel costs and a general slowdown of the economy will keep them where they are. The problem is that unless wages increase, more than half of Canadians have seen their standard of living drop
I was disappointed I saw you uploaded a video about this, because I knew that meant the answer was going to be nuanced.
Thanks for the information, but can I please just go back to blaming corporate greed so the problem seems manageable? Lol
be quiet rich person
We can still blame corporate greed because that's the reason we are even in this mess in the first place. You can see this easily with fast food with the same shite food being 2-3 times more expensive for no reason. It's not exclusively corporate greed, but that's a giant factor.
Wonderful video, as always. Would love to see more Canadian content, please and thank you.