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Report: Grocery revenues exceeded cost increases; profits remain elevated

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Monday, April 29, 2024   

A new report from the Federal Trade Commission casts doubt on the idea that rising grocery prices in Maryland and nationwide have been due to retailers' rising costs.

In 2021, the Biden administration FTC began studying America's supply chains including the retail grocery sector. Commissioners examined how COVID-era supply chain disruptions impacted competition among retailers, wholesalers and producers, and how consumers and businesses were affected.

While food price inflation had been less than 2% for several years, the steep rise in grocery prices since COVID saw a 6% annual rate by 2021, and 10% the next year.

Angela Huffman, president of the advocacy group Farm Action, said the report shows while grocers have seen rising costs, public data suggests profits have risen faster than costs.

"In 2021, the retailer revenues rose to more than 6% higher than their total costs, and those profits are still going up," Huffman pointed out. "In the first nine months of 2023, the profits increased to 7%."

The report noted the consolidation in the sector with the top four grocery chains doubling their share of the market since 1990. Maryland has joined seven other states in the FTC lawsuit opposing the merger of Kroger and Albertsons.

In the face of supply-chain disruptions, the FTC report illustrates how large firms used anticompetitive practices to gain market share, at times forcing suppliers to avoid filling orders from smaller grocers. Commissioners found in responding to the disruptions created by concentrated supply chains, some grocers diversified suppliers, while others considered vertical integration with the idea of buying or building their own production capacity.

The report noted in some regions with few producers, the decision to buy an existing food supplier instead of building new capacity may leave remaining buyers worse off. Risks to consumers include retailers with increasing pricing power as well as supply issues for smaller grocery operators.

Huffman argued in some cases, the large firms could be broken up.

"This would be kind of the farthest extent of what they could do, but go so far as breaking them up," Huffman asserted. "In years past, they broke up the telephone companies and the railroads, and that would be the ideal outcome for us, is to take away their excessive power."

A November study found Marylanders faced the third-highest grocery price inflation in the nation, at 7%.


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