A top company leader at Kroger has admitted during an antitrust trial the company gouged prices on select items above inflation levels.
“This is not at all surprising,” Drew Powers, the founder of Illinois-based Powers Financial Group, told Newsweek.
“Companies across multiple industries have been posting record profits since the COVID-19 crisis while consumers have faced the highest inflation in recent history.
The math can only point to companies raising prices above the general level of inflation.
“On milk and eggs, retail inflation has been significantly higher than cost inflation,” Groff said in the internal email to other Kroger executives.
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“Supply chain issues, rising shipping costs, and increased wages certainly played their part in the higher prices we’re currently seeing.
During the pandemic, food and energy prices drove the overall level of inflation, and many of those same sectors saw companies post record profits, Powers said.
“We’ve moved away from true capitalism towards an oligarchic structure with less competition and larger players dominating the market,” Thompson told Newsweek.
“It’s like catching a kid with their hand in the cookie jar, and instead of denying it, they proudly announce, ‘Yep, I took ’em all,’ Ryan told Newsweek.
During an antitrust trial, a senior Kroger executive acknowledged that the company undervalued some products by more than inflation.
In testimony given on Tuesday to an attorney for the Federal Trade Commission, Andy Groff, Senior Director for Pricing at Kroger, stated that the supermarket behemoth had increased milk and egg prices above inflation.
The founder of Powers Financial Group, located in Illinois, Drew Powers, told Newsweek, “This is not at all surprising.”. Since the COVID-19 crisis, businesses in a variety of industries have reported record profits, but consumers have experienced the highest rate of inflation in recent memory. All that the math can indicate is that businesses are raising their prices higher than the overall rate of inflation. As they say, “Never let a good crisis go to waste.”. “.”.
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The retail behemoth, Kroger, announced that it would be purchasing its leading rival, Albertsons, in a court proceeding related to its FTC lawsuit. This is when the questioning started.
After an internal email from the executive revealed that the price of milk and eggs regularly exceeded the inflation-adjusted amount needed for the chain to remain profitable, Groff stated that Kroger plans to “pass through our inflation to consumers.”.
“Retail inflation on milk and eggs has been significantly higher than cost inflation,” Groff wrote to other Kroger executives in an internal email.
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Newsweek sent an email requesting a response from Kroger.
Groff’s statement was “cherry-picked,” a Kroger spokesperson previously told Bloomberg, and “does not reflect Kroger’s decades-long business model to lower prices for customers by reducing its margins.”. “. .
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Some people disagree that the email comment represents the grocery industry as a whole or Kroger’s pricing strategies.
For a considerable time, economists have pointed out that supply chain disruptions during the pandemic were advantageous for the grocery sector, which is made up of a small number of chains like Walmart and Kroger, permitting the companies to raise prices above what was required to maintain profits.
According to Newsweek, Alex Beene, a financial literacy instructor at the University of Tennessee at Martin, “comments like this, despite their honesty, call into question the explanations Americans have been given for the last three years on inflation.”.
“The current price increases are mostly due to supply chain problems, growing shipping costs, and wage increases. The acknowledgement that some prices were raised merely because companies knew they could, however, undermines the argument put forth by those who claim price gouging doesn’t exist. “. .
According to the FTC’s antitrust lawsuit, consumers will suffer even more price increases if Kroger succeeds in acquiring Albertsons because the two chains’ combined market share will lessen competition.
A Greater Trend?
Food and energy prices drove the overall level of inflation during the pandemic, and Powers noted that many of those same sectors saw record profits from their businesses.
In addition to saying that most businesses that engage in price gouging face minimal repercussions, Powers said, “There is not just one bad apple in this bunch.”.
“Historically, the penalties meted out to corporations that engaged in price gouging have been minuscule in comparison to the profits generated by the practice. These accusations surfaced during FTC hearings related to Kroger’s attempt to acquire Albertson’s, so it will be interesting to see if they are more severe this time around, Powers added.
Groff’s remarks, according to finance expert Kevin Thompson, founder and CEO of 9i Capital Group, underscore a wider trend in the present economic landscape.
Thompson told Newsweek, “We’ve moved away from true capitalism towards an oligarchic structure with less competition and larger players dominating the market.”.
The competitive dynamics and consumer choice have been weakened by this change, which is the result of a concentration on shareholder interest. “. .
According to Thompson, executives are typically motivated to optimize shareholder wealth through cost-cutting and revenue-growth.
Thompson stated, “It is likely that this pricing strategy was put in place to maximize profits.”. Since executive pay is frequently correlated with stock price performance, other supermarkets might have followed suit. Many executives go beyond what is allowed by law in an attempt to increase profits. “.”.
Thompson stated Kroger is not likely to face serious repercussions from the FTC because consumers typically still have the option to shop at other supermarkets like Walmart.
However, financial expert Michael Ryan, the creator of michaelryanmoney . com, suggested Kroger may have overreached itself with its price-gouging admission.
Like when you catch a child sticking their hand in the cookie jar and they proudly say, ‘Yep, I took ’em all,’ Ryan told Newsweek, rather than trying to deny it. “In this game, Kroger is not by himself. Other major players like Walmart and Publix are probably pulling similar pranks, I’d bet my last dollar. “.”.
Ryan stated customers could act quickly with their wallets, even though this is probably a bigger issue in the grocery industry.
Ryan declared, “Customers aren’t dumb.”. “When they feel taken advantage of, I’ve witnessed devoted customers leave. Regaining their trust is difficult once it has been lost. “.
