If Big Food is So All-Powerful, Why Aren't They Increasing Prices More?

I was going through some old papers from my parents' home recently and, randomly, stumbled onto a page from an old weekly free newspaper I delivered in my early teens. Here's a blow-up of a tiny square of text from the bottom left corner of the paper's front page:

Not too shabby for my very first job!

Unfortunately, this post isn't about my beginnings in the business world. The truly interesting thing about this piece of paper was on the other side, where an old local grocery store listed sale prices for various foods:

William's was a smallish, family-owned grocery store, and it happened also to be my mother's favorite. She thought it had the best prices in town, and she shopped there consistently each week. Until it closed, driven out of business in the late 1980s by larger chain grocers.

But what's stunning about this ad is how little many of these prices have changed. Some prices are nearly the same today as they were in 1985: think chicken or frozen veggies. Other items--once you think about how long a period much time 32 years really is--represent surprisingly low levels of per-year inflation. For something to double in price in 32 years, you'd have to have an inflation rate of about 2.2% per year. Quite a few food items on this page (apple juice, Polish sauce, bacon, tomato paste) would fit roughly into that category or better.

Keep in mind, this is like a list of promoted items, which means prices you see in the photos above are sale prices. Compare these prices to sale prices today at a typical grocery store, and you'd find even less inflation.

And, sure, some products are more meaningfully more expensive: today, onions in my store cost around $1.99 for a three-pound bag, haddock fillets cost perhaps some four times more, and now that Pabst has become a hipster throwback brand, forget about it, that price is off the charts. But those are exceptions. At the bottom of it all, it's quite stunning to see so little inflation in food prices over such a long period of time.

Now, there are plenty of food bloggers and food pundits out there who use "the greedy food industry is trying to make us all fat" as a default explanation for everything.

But if the food industry were really that greedy, wouldn't they raise prices far more relentlessly? After all, food is a basic necessity. We have no choice but to buy it.

If food companies were as all-powerful and domineering as many food pundits seem to think, why wouldn't all food prices go up at the rate of, say, university tuition costs, which have increased a haddock fillet-like three to four times over this same 32 year period? Makes you wonder who's really greedy, doesn't it?


Anonymous said...

When people complain about the "food industry," they usually mean the makers of heavily marketed processed products, rather than farmers producing primary foods like meat and vegetables. And, there are other ways to increase profit besides directly raising prices -- downsizing packages and substituting cheaper ingredients.

Melissa said...

The price comparison is fascinating! I can still get a dozen eggs for that price - or less - at my local Winco. And the meats and some of the produce have barely changed. I'm really surprised.

Marcia said...

You'd really have to delve into the history of the various individual industries, and of the grocery companies, to make a good comparison. And also look at competition.

As an example - I'm a former grocery store worker myself. It was fairly common, back in the mid-1980s, for *most* grocery store employees to work full time and have benefits. There were few exceptions. The manager usually had a certain number of full time jobs to work with. But it was well known that you start as a bagger. Then you can move on to stocker, or produce, or checker, or deli, or bakery - and that's when full time hours and benefits kick in. Also, the wages were decent - once you moved off bagger, you were no longer minimum wage.

What percentage of Walmart employees work full time and get benefits, I wonder?

Then look at the living conditions of the animals being sold. Eggs, chicken, etc - there have been huge changes in the industries (and not for the better) - in order to increase supply and keep prices low. Also a lot of consolidation.

The comment above about downsizing is a good one. Who remembers when a can or bag of vegetables were actually a full pound! Me!

Finally, what percentage of items on that ad are processed, compared to today (a small fraction) - the "food industry" is pretty vast nowadays. 30+ years ago, the options for boxed and bagged were a lot fewer and further between, than they are now. (Not necessarily busting on that, we eat our fair share of frozen pizza!)

Anonymous said...

Consolidation and automation. Agriculture accounted for ~3 percent of jobs in 1985, and about half that now.