It’s going to keep getting more expensive to put food on the table for the forseeable future.
Kroger, one of the largest supermarket chains in the U.S., said that prices on food that have already risen 2.6% this year so far are poised to jump another 2 to 3% by the end of the year due to inflation and supply chain problems.
Meat prices are responsible for the bulk of the increase so far, with beef prices rising 14%, pork going up 12%, and poultry spiking 6.6%.
Kroger is “passing along higher cost to the customer where it makes sense to do so,” CFO Gary Millerchip said on Friday’s second-quarter earnings call.
Meat companies profiting from price increases
The only area where food prices have not increased is produce, which has fallen .9% after rising briefly earlier in the year.
Food processing plants are not seeing enough competition, the Biden administration accused, and vowed to enforce anti-trust laws against them amid record profit-taking. Four companies account for the majority of meat processing in the U.S., which may be causing price increases because there is not enough competition to stop them.
“Just four large conglomerates control the majority of the market for each of these three products [beef, pork and poultry], and the data show that these companies have been raising prices while generating record profits during the pandemic,” National Economic Council Director Brian Deese said at a press briefing on Wednesday.
The Federal Reserve, on the other hand, has blamed food price increases on supply chain problems due to COVID-19. The “transitory” increases will resolve when COVID does, it said.
Kroger suggests money-saving tactics
Kroger is hoping that consumers will shift to its private label brands to save money rather than cut back on the amount of food they buy.
“If you go back to prior times when you had inflation, the customer, a lot of times, would trade over to our brands as part of their structuring their budget,” Kroger CEO William McMullen said. “We’re not seeing budget changes on our brands happening at this point, but I’m sure if inflation continued.”
Of concern to the grocery chain were increases in the prices it is paying for transportation and warehouse space, as well as higher wholesale food prices that the chain must consider passing on to consumers.
In the short term, Kroger stock prices fell 7% on Friday after the announcement, but that may just be an overdue correction to prices that had been up 34% this year.