President Biden, whose approval rating has taken a hit amid high inflation, is beginning to pressure big supermarket chains to lower food prices for American consumers, accusing the stores of making excessive profits. and scam buyers.
“There are still too many corporations in America ripping off people: price gouging, junk tariffs, greed, counterinflation,” Biden said. last week in South Carolina. Advisers say those comments are a preview of greater pressure on supermarket chains and other companies that are maintaining higher-than-usual profit margins after a period of rapid price growth.
Biden’s public offensive reflects the political reality that while inflation is moderating, voters are angry about how much they pay at the grocery store and that is weighing on Biden’s approval rating ahead of the 2024 election.
Economic research suggests The cost of eggs, milk, and other staples—which consumers buy much more frequently than big-ticket items like furniture or electronics—plays a huge role in shaping Americans’ views on inflation. Those prices rose more than 11 percent in 2022 and 5 percent last year, amid a post-pandemic inflationary surge that was the country’s fastest price rise in four decades.
The pace of increase is slowing rapidly: In December, prices of food consumed at home rose by just over 1 percent, according to the Department of Labor. But administration officials say Biden is well aware that prices remain too high for many families, even as key items, such as gasoline and home furnishings, are now cheaper than at their post-pandemic peak.
And yet, there is a general belief among administration officials and their allies that there is little more Biden can do unilaterally to force food prices down quickly.
“It’s hard to determine what the short-term policy response is in this situation,” said Bharat Ramamurti, a former economic aide to Biden and author of a report on grocery price inflation to be released Friday from the progressive Groundwork Collaboration. in Washington.
“When you have something that is partly due to supply disruptions, what can you really do to put downward pressure on prices?” he said.
The Federal Trade Commission is currently reviewing (and expected to block) a merger between two large grocery chains, Kroger and Albertsons. Opponents of the deal say it would reduce competition and allow the merged company to charge higher prices to buyers. But blocking that deal would do little to address the current price rise.
On Thursday, a Kroger executive welcomed Biden’s increased focus on supermarket profits, insisting that the merger would reduce costs for customers.
“We agree with President Biden: Too many grocery stores in America have increased their margins in contrast to Kroger, which has consistently reduced our margins for nearly 20 years to save customers billions,” said Keith Dailey, vice president of corporate affairs and head of sustainability for the Kroger group. official. “Through our merger with Albertsons, Kroger will lower prices for even more American consumers.”
A new analysis from the White House Council of Economic Advisers suggests that high profit margins among large grocery retailers could be contributing to the persistently high price of food on store shelves. The analysis, which is based on data from quarterly census financial reports, found that food and beverage retailers have increased their margins by about 2 percentage points since the eve of the pandemic, reaching their highest level in two decades.
Much of that increase came in 2021 and 2022, around the time other retailers, such as clothing and sporting goods stores, also saw their profit margins increase. Grocery store margins have remained elevated, according to the analysis, even as other retailers’ margins have fallen back to more normal levels based on recent history.
“President Biden has made clear that as input prices fall, corporations should pass those savings on to consumers,” White House spokesman Michael Kikukawa said this week.
Biden made a similar comment last fall in a post on the social media platform X.
But the White House analysis also implies that supermarkets’ higher profit margins don’t come close to explaining the price increases grocery shoppers have experienced under Biden.
Other research suggests that additional forces, such as consumer demand and supply chain disruptions, are a much bigger factor in price increases. An attack of bird flu caused Egg prices skyrocket. last year, for example. And food producers, like soft drink makers, have continued to raise prices even as their costs have fallen, generating heady profit margins.
Researchers at the Federal Reserve Bank of Kansas City found last year that strong job growth in the U.S. economy and wage gains associated with a tight labor market were key drivers of grocery price increases. Researchers found that processed foods, such as chocolate bars, account for three-quarters of recent increases in grocery prices.
The tight labor market, they said, had resulted in higher costs to produce and distribute those foods, “which have been passed on to consumers.”
The Biden administration has attempted several efforts to ease pressures on grocery prices, particularly on the supply side. The Agriculture Department has spent hundreds of millions of dollars to help companies expand in the meatpacking industry, which is dominated by a handful of big players.
The department also changed its calculations for federal food assistance benefits and adjusted them for inflation, effectively increasing the value of food stamps for many low-income Americans. Ramamurti and his co-authors, Elizabeth Pancotti and Clara Wilson, estimate that those increases have far outpaced the rise in the cost of food for 40 million families in recent years.
In an interview, Pancotti said the consumers who felt the most pain from high food prices were those who made enough money not to qualify for the food stamp program, known as SNAP.
“There are a lot of people in the middle who are low-income, but not poor enough to receive SNAP benefits, and who pay 25 percent more” for food, he said. “At the end of the day, it just doesn’t reach enough people.”
The commission is also considering enforcement actions under a nearly 90-year-old law, the Robinson-Patman Act, which requires suppliers of retail products to offer the same terms to all retailers they sell to. Supporters of such actions say they would reduce prices at smaller grocery stores by ensuring they can purchase items for the same cost as large retailers.
Politically, however, large grocers are the most attractive target for Biden. His advisors are discussing how pressure can increase on the big chains in the coming weeks and months.
“Americans, we are tired of being taken for fools,” the president said in South Carolina. “And that’s why we’re going to keep these guys: keep them and lower the prices.”