Biden focuses on supermarket chains over food prices

President Biden, whose ratings have suffered from high inflation, is starting to pressure major supermarket chains to lower food prices for American consumers, accusing the stores of reaping excessive profits and ripping off shoppers.

“There are still too many companies in America ripping people off: price gouging, junk fees, greed inflation, shrink inflation,” Mr. Biden said. last week in South Carolina. Employees say these comments portend more pressure on supermarket chains and other companies maintaining higher-than-usual profit margins after a period of rapid price growth.

Mr. Biden's public offensive reflects the political reality that even as inflation is slowing, voters are angry about how much they pay at the grocery store, and that is weighing on Mr. Biden's approval ratings ahead of the 2024 election.

Economic research suggests the cost of eggs, milk and other staples — which consumers buy far more often than expensive items like furniture or electronics — play an outsized role in shaping America's view of inflation. Those prices rose more than 11 percent in 2022 and 5 percent last year, amid a post-pandemic inflation surge that was the country's fastest burst of price increases in four decades.

The rate of increase is decreasing rapidly: in December, prices for food consumed at home rose by just over 1 percent, the Ministry of Labor said. But administration officials say Mr. Biden is acutely aware that prices remain too high for many families, even though key items such as gasoline and home furnishings are cheaper now than at their post-pandemic peak.

And yet there is a general belief among administration officials and their allies that there is little else Biden could do unilaterally to quickly drive down grocery prices.

“It's difficult to know what the short-term policy response is in this situation,” said Bharat Ramamurti, a former economic aide to Mr. Biden and author of a report on food price inflation to be published Friday in the United States. progressive Groundwork Collaborative in Washington.

“If you have something that is partly caused by supply disruptions, what can you actually do to put downward pressure on prices?” he said.

The Federal Trade Commission is currently investigating and is expected to block a merger between two major supermarket chains, Kroger and Albertsons. Opponents of the merger say it would reduce competition and allow the merged company to charge customers higher prices. But blocking that deal would do little to address the current price increase.

A new analysis from the White House Council of Economic Advisers suggests that higher profit margins at major supermarkets could be contributing to the persistently high price of food on store shelves. The analysis, based on data from the Census Quarterly Financial Reports, shows that food and beverage retailers have expanded their margins by about 2 percentage points since the eve of the pandemic, reaching the highest level in two decades.

Much of that increase occurred in 2021 and 2022, around the time other retailers — such as clothing and sporting goods stores — also saw profit margins rise. Supermarket margins have remained high, the analysis shows, 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, companies must pass those savings on to consumers,” White House spokesman Michael Kikukawa said this week.

Mr. Biden made a similar point last fall in a post on the social media platform X.

But the White House analysis also suggests that the higher profit margins don't come close to explaining the price spikes that shoppers have experienced under Mr. Biden.

Other research shows that additional forces – such as consumer demand and supply chain disruptions – are a much bigger factor in the price increases. Caused an attack of bird flu egg prices are rising last year for example. And food manufacturers, like soda makers, have continued to raise prices even as their costs have fallen, leading to huge profit margins.

Researchers at the Federal Reserve Bank of Kansas City found last year that strong job growth in the US economy, and wage increases associated with a tight labor market, were a major contributor to the increase in food prices. Processed foods, such as candy bars, are responsible for three-quarters of recent food price increases, the researchers found.

The tight labor market, they said, had resulted in higher costs of producing and distributing these foods, “which have been passed on to consumers.”

The Biden administration has made several attempts to ease price pressures in the grocery sector, especially on the supply side. The Department of Agriculture has spent hundreds of millions of dollars to help companies expand in the meatpacking industry, which is dominated by a handful of major players.

The department also changed federal food assistance benefit calculations to adjust for inflation, effectively increasing the value of food stamps for many low-income Americans. Mr Ramamurti and his co-authors, Elizabeth Pancotti and Clara Wilson, calculate that these increases have more than offset the higher cost of groceries for 40 million families in recent years.

In an interview, Ms. Pancotti said the consumers feeling the most pain from high food prices are those who made just enough money not to qualify for the food stamp program, known as SNAP.

“You have a huge group of people in the middle who are low-income but not impoverished enough to get SNAP benefits, and they pay 25 percent more” for groceries, she said. “At the end of the day, it just doesn't reach enough people.”

The commission is also considering enforcement action under a nearly 90-year-old law, the Robinson-Patman Act, which requires suppliers of retail goods to offer the same terms to every retailer they sell to. Supporters of these enforcement actions say they would lower prices at smaller grocers by ensuring they can buy items at the same price as major retailers.

Politically, however, the major grocers are the most attractive target for Biden. Aides discuss how he can increase pressure on major chains in the coming weeks and months.

“Americans, we are tired of being played as fools,” the president said in South Carolina. “And that's why we're going to keep these guys – stick with them and get the prices down.”