The Federal Trade Commission has announced plans to sue to block a merger between mega grocery chains Kroger and Albertsons. The duo oversees Ralphs, Vons, and Pavilions in Southern California. One of the concerns: A merger would raise food prices even more. The news comes as the USDA says Americans are spending more of their income on food than they have in 30 years.
Amid the proposed merger, fears exist that a massive grocery giant would stifle competition, leading to unbalanced power over food prices, says Jesse Newman, food and agriculture reporter at the Wall Street Journal.
Food manufacturers report that it’s rare for grocery prices to drop once they’ve risen, she adds. There are exceptions for products such as coffee and margarine, which are based on commodity prices. Inflation has eased in other categories, she points out, but food prices are still high.
Meanwhile, costs incurred by restaurants and food companies are still in flux, which impacts consumer pricing.
“There are commodities that have fallen … major agricultural commodities [like] corn, wheat, chicken. Restaurants will say chicken has gotten cheaper. But cocoa, sugar, beef, french fries — they say are still high or rising. So when they look at their basket of goods, when they look at their labor, they say overall, they are not feeling any deflation. And they say that they have to price their goods accordingly.”
High prices have also shifted consumer behavior. Newman points to stories about prospective tourists who have scaled back their travel plans because more of their money is going toward food. People are also scaling back the amount of times they eat out.
“A lot of people have given up going out to eat. They only go out to eat for special occasions. Or on pizza night, they will have frozen pizza instead of ordering from their favorite neighborhood joint,” Newman explains. “[They are] even limiting what they're eating when they do go out — things like dessert and alcohol and guacamole and chips.”
The Biden administration faces backlash over high prices, but Newman says it’s unclear what happens next.
“They've picked up on the concept of shrinkflation. So this is something that they really are beginning to talk about and realizing that food prices are just a huge issue for consumers that they want to talk about, although, what they can actually do about it is a question mark.”