FOOD CRIMES: CPG Profits Are UP!

The cost of food has declined, but grocery bills are still up. To me, this is a food crime. What they're basically saying is that the cost increases give food makers an ability to hike prices above what those increases called for boosting profits and correcting what they saw as two low cost prices in previous years.

Phil: It's amazing some of these quotes. A friend of ours, Mark Lang, who's an associate professor of marketing at the University of Tampa, Mark has also done a lot of work for the Mushroom Council, was quoted in this, they are, to me, absolutely profit taking, ConAgra and Hershey reports higher profits in their most recent quarters. And, you know, actually what happened is Sean Connolly, who's the CEO of ConAgra said at a conference how ConAgra was able to raise prices without losing sales by volume. He said the prices were just too low in frozen pre- pandemic. What we've been able to illustrate for the retailer is the consumers welcome a $4 and $50 unit or package, because at that price of frozen meal is still a good value. They have Marie Calendars, they have Bird's Eye, they've got Healthy Choice. And, you know, at $4.50, it's probably about double what it was prior to that. And as we've talked about here before, you know, Coca-Cola's CEO quoted again, saying we've earned the right to price with the consumers. So what can we do here? These food companies are just making tons of profits. They're not reducing prices. What's, what's the next step for a consumer?

Sally: Yes, it is, it is frustrating to see that the cost of ingredients are down, agricultural commodities are down and still yet, consumers are not getting any relief. We have heard that transportation and labor costs are up, but still the message is very unclear. And what is coming to consumers is, well, you'll pay it, so we'll charge it. And I think that that is a very, scary territory for brands and retailers to get into if they retain the loyalty of these customers they've had for so long.

Phil: Absolutely. And there's a couple retailers who are fighting it. I mean, most retailers right now are not just taking the price increases. They're saying that, "Hey, you've gotta prove that you really need it." But Winn-Dixie just announced, and they've had this program since 2016, called Down Down, but they've just released the latest offerings of 15% savings on more than 150 food and packaged goods products in the store for the spring. They do this every quarter, Down Down is designed to help customers get more for their money on frequently purchased items. Also across the pond in France, the French government said last week that it has made a deal with major supermarkets to cap many food prices. What they're trying to do is cut prices for a wide range of foods, the choice of which foods are up to the retailer, basically April to June, they want to turn into what they're calling an anti inflation quarter. So do we think that more retailers are really gonna put pressure on these brands and just not take this, I know that Hy-vee and their new stores, they now have little stickers with arrows that point down to show a price reduction. Price is becoming, you know, the number one issue for consumers when they go into the supermarket.

Sally: Yes. And, you know, it does sound like a really beneficial program that the French Prime Minister is putting in place the anti inflation initiative. He's telling us that the selective products will also come with a logo, called the Anti Inflation Quarter that features the colors of the French flag. I think that that, you know, sort of signaling to people is great that these retailers or products have gotten on board to help support their country and the price of food. So I think that that's something people will really embrace, at least the consumers.

Phil: Absolutely.