Kroger’s Admission: Prices Above Inflation Rates
A top Kroger executive admitted that the company had raised prices on certain items beyond inflation rates. Andy Groff, Kroger’s Senior Director for Pricing, testified during an antitrust trial before a Federal Trade Commission (FTC) attorney that prices for eggs and milk were increased above what inflation would necessitate.
What Is Inflation?
Inflation is calculated by tracking the change in prices of a specific basket of groceries over time. This basket might include items like bread, milk, eggs, meat, and fresh produce. By comparing the total cost of these groceries in one period to their cost in a previous period, economists can determine the rate of inflation. The percentage increase in the overall price of the basket reflects how much grocery prices—and thus inflation—have risen.
Although it recently dropped to less than 3%, inflation has still been a top concern among consumers since the pandemic. Prices for everything from groceries to home goods have remained stubbornly high, squeezing the pocketbooks of millions of Americans.
Corporate Profits vs. Inflation
Kroger now admits that part of the price increases everyday Americans have been experiencing are due to corporations wanting to make higher profits. Groff’s testimony highlighted that Kroger’s pricing strategy was designed to pass on the higher costs of items to consumers. “On milk and eggs, retail inflation has been significantly higher than cost inflation,” Groff noted in an internal company email, lending more credibility to accusations of intentional price-gouging.
Impact of Supply Chain Issues and Business Practices
“Supply chain issues, rising shipping costs, and increased wages certainly played their part in the higher prices we’re currently seeing,” said Alex Beene, a financial literacy instructor at the University of Tennessee at Martin. “However, the admission that some prices were elevated simply because businesses knew they could doesn’t help the case for those arguing that price gouging isn’t an issue.”
FTC Investigation into Grocery Retailers
The FTC has begun investigating grocery retailers who have experienced record profits since the pandemic but who have failed to lower prices back to pre-pandemic levels, hurting not only consumers but also small businesses and independent grocers nationwide.
Potential Backlash for Kroger
Kroger may face backlash from consumers if found guilty of violating antitrust laws. “Customers aren’t dumb,” said Michael Ryan, a finance expert and founder of michaelryanmoney.com. “I’ve seen loyal shoppers jump ship as soon as they feel ripped off. Once that trust is gone, it’s hard to win them back.”
