“A top company leader at Kroger has admitted … the company gouged prices … above inflation levels,” Newsweek reported today (here). “Kroger’s Senior Director for Pricing Andy Groff said the grocery giant had raised prices for eggs and milk beyond inflation levels.”
Why didn’t competition prevent this? After all, businesses don’t want to charge less; they do it to avoid losing customers. The answer is simple: There are only a few grocery chains, so competition is limited, and if they all take advantage of inflation to fatten profits, consumers have no choice but to pay up.
Granted, some food inflation was caused by cost increases. Grocery chains raised wages, and during the pandemic they incurred costs for Covid safety measures. The pandemic also caused supply shortages, and when supply can’t meet demand, higher prices act as a form of rationing.
The testimony was elicited in relation to an FTC hearing on Kroger’s plan to acquire the Albertson’s chain (which includes Safeway). Separately, attorneys general of several states are suing to block this merger. This testimony suggests the grocery industry needs more, not less, competition and this merger shouldn’t pass muster.