Kroger Executive Admits Company Gouged Prices Above Inflation - Newsweek
S E E D E D C O N T E N T
CLOSE X By Suzanne Blake Reporter, Consumer & Social Trends
A top company leader at Kroger has admitted during an antitrust trial the company gouged prices on select items above inflation levels.
While testifying to a Federal Trade Commission attorney Tuesday, Kroger's Senior Director for Pricing Andy Groff said the grocery giant had raised prices for eggs and milk beyond 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. As the old saying goes, 'Never let a good crisis go to waste.'"
The questioning came during a court hearing for Kroger's FTC suit after the retail giant announced it would be acquiring top grocery competitor Albertsons.
Shoppers are seen in a Kroger supermarket on October 14, 2022, in Atlanta, Georgia. A Kroger executive admitted the grocery chain raised prices on eggs and milk beyond inflation levels. Shoppers are seen in a Kroger supermarket on October 14, 2022, in Atlanta, Georgia. A Kroger executive admitted the grocery chain raised prices on eggs and milk beyond inflation levels. ELIJAH NOUVELAGE/AFP via Getty Images
Groff said Kroger intends to "pass through our inflation to consumers," after an internal email from the executive showed that the price of eggs and milk routinely surpassed what inflation would require for the chain to still make profits.
"On milk and eggs, retail inflation has been significantly higher than cost inflation," Groff said in the internal email to other Kroger executives.
Newsweek reached out to Kroger for comment via email.
A Kroger spokesperson previously told Bloomberg that Groff's comment was "cherry-picked" and "does not reflect Kroger's decades long business model to lower prices for customers by reducing its margins."
Not everyone believes that the email comment is reflective of Kroger's price-setting policies or the grocery industry at large.
Economists have long indicated that the grocery sector, which is composed of only a few chains like Kroger and Walmart, was benefiting from supply chain disruptions during the pandemic, allowing the companies to hike prices beyond what was necessary to retain profits.
"Comments like this, despite their honesty, call into question the explanations Americans have been given for the last three years on inflation," Alex Beene, a financial literacy instructor for the University of Tennessee at Martin, told Newsweek.
"Supply chain issues, rising shipping costs, and increased wages certainly played their part in the higher prices we're currently seeing. However, the admission some prices were elevated simply because businesses knew they could doesn't help the case for those arguing price gouging isn't an issue."
The FTC antitrust case alleges that if Kroger successfully acquires Albertsons, consumers will see even higher price hikes due to the reduced competition from the two chains being merged.
Larger Trend?
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.
"There is not just one bad apple in this bunch," Powers said, adding that most companies who engage in price gouging receive limited consequences.
"Historically, corporations guilty of price gouging have faced relatively light repercussions when compared to the profits made from the offense. It will be interesting to see if Kroger is hit harder this time around as these allegations have come to light during FTC hearings in their bid to acquire Albertson's," Powers said.
Kevin Thompson, a finance expert and founder and CEO of 9i Capital Group, said Groff's comments highlight a larger trend in the current economic system.
"We've moved away from true capitalism towards an oligarchic structure with less competition and larger players dominating the market," Thompson told Newsweek.
"This shift, driven by a focus on shareholder interest, has diminished consumer choice and competitive dynamics."
Executives tend to be incentivized to maximize shareholder wealth by increasing revenue and reducing costs, Thompson said.
"This pricing strategy was likely implemented to maximize profits," Thompson said. "Other grocers may have taken similar actions, as executive compensation is often tied to stock price performance. Many executives push the boundaries of what's legally permissible to boost returns."
Because customers generally still have choices to shop at other grocers like Walmart, Thompson said Kroger is unlikely to experience any severe consequences from the FTC.
But Michael Ryan, a finance expert and founder of michaelryanmoney.com, said Kroger might have bitten off more than it can chew with its price gouging admission.
"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 . "Kroger's not alone in this game. I'd bet my last dollar that other big players like Walmart and Publix are pulling similar stunts."
Despite the fact that this is likely a larger problem in the grocery sector, Ryan said consumers could react swiftly with their wallets.
"Customers aren't dumb," Ryan said. "I've seen loyal shoppers jump ship as soon as they feel ripped off. Once that trust is gone, it's hard to win them back."
Tags
Who is online
238 visitors
hmmm... could Harris have been right about price gouging?
So weird. And here right wing populists were certain it was all Harris' fault.
that's just scratching the surface...
Bullshit, prove it.
what good would that do?
Krogers profits after costs have been over 30 billion dollars a year in recent years.
Kroger Gross Profit 2010-2024 | KR | MacroTrends
John
I get your point but gross profit is a false indicator, the number you want to compare is net profit for example in 2024 Kroeger's net profit was $2.2B which was down slightly.
Kroger earned $2.2B profit despite slowing sales in 2023 (usatoday.com)
The key to retail sales success is finding the price you can put on a product and still have sufficient sales to maintain (or even grow) product sales. Too low and you lose money - too high and you lose customers.
Customers have to discern where to buy what they want and what they need and how much they are willing to pay for it.
Stock buybacks, executive compensation, investments in long term depreciable assets, dividend payments, stock option packages, regulatory fines, prepaids plus any number of other strategies may be employed to hide profits and avoid taxes...
The stock market is at record high based on exceptional profits.
Few people in business understand such concepts. One of the reasons so many businesses fail. Fewer still understand them if they’ve never owned and/or run a business but …… I read an article once and one summer at band camp ….
from the article you linked
There are a lot of people who believe that whatever big business decides to do is fine. Rip people off? Hey, its just capitalism at work.
John
It only works that way if people let it by continuing to support the stores and pay the higher prices and let the stores rip them off. There are alternative stores and there are alternative brands to buy
Sparty
Your comment makes no sense - so I do not know how to respond. I hope you enjoyed summer band camp
jbb
Those points are true
Thos points do not explain why consumers are content (almost eager) to just pay more and more for the same products and then bitch about how much the products.
Quit paying the higher prices, shop elsewhere and the prices will come down
[✘]
So... I should just drive across town to see what another store is charging? Or maybe I could just stop eating for a month to see if the prices go down?
It is not practical to suggest "shop elsewhere" as a solution. A) it is absolutely not always possible and B) it is not human nature. People like to do what they have done.
Online searching is more environmentally responsible.
Human nature has to be changed, that is what progress is all about.
Anyone who thinks price gouging will be ended by telling people to go to a different grocery store 4 or 5 miles away is deluding themselves.
Most shoppers in Ward 8 of our nation’s Capital can’t travel to other stores without spending a lot of time on buses or subway.
Or maybe you should check out prices in ads, on line etc and find out where friends and others are getting better deals
People like to do what they have done.
John
If people do as they have always done, then they will have the same results as they always have.
If the consumer wants more control of the market prices, then the consumer needs to take action not sit around and wait for the government or someone else to "fix it" for them
CORRECT!
Easy to say, but if the merger between Kroger and Albertsons goes through they will control 57% of the Northwest market which will leave Costco and Walmart controlling the rest ... smaller stores can kiss their customers goodbye.
.
Or the presence of Kroger/Albertson and an honest effort to balance the market could force WalMart and other large grocery outlets to lower their prices.
No
LOL
That's what they said. And you believe them?
lol
No, that's not true, and no they won't.
we should just trust corporate america to do what's right by all americans, huh?
How naive and foolish.
'an honest effort'
lolololol
This will force the smaller mom and pop stores out of business - not lower prices.
Why else do you think the Biden administration is trying to stop this?
True. The stock market-- as well as the overal economy-- has done very well under Biden.
(P.S. this benefits many Americans-- so own stocks they buy-- many others are in union pension plans who's profits come from stocks-- profits that go to union members who are in the pension plans...)
I am not some uber-wealthy corporate CEO. I am retired from my regular job--and am living on Social Security plus a good pension plan created by my union (when the stock market goes up. my monthly pension payment goes up).
funny how that didn't happen in 2015 when albertson's bought safeway...
If you live in a small town like I do you have Kroger and Walmart. Nothing else.
So, you should move then. That's usually the answer from some folks.
Oh, I forgot, that's when it comes to abortion if it is restricted or illegal in your state.
People that live in large cities have no clue what rural life is like.
i live in a village of less than 2500 and within ten miles we can buy groceries at Sanders, Drug Mart Market, WalMart, Giant, Aldi's. Sparkle and Save a Lot
Plenty of competition and pressure for lower prices and we are seeing lower prices
You have to shop smart
I haven't seen any stats on that merger - have you got any to share?
That's not true for everyone.
That's not true.
That's not a very smart remark.
But she doesn't. What works for you doesn't work for anyone/everyone else.
What I commented was a fact, do you not like facts?
What works for you doesn't work for anyone/everyone else.
Never said it did, I was merely refuting a generalization about the availability of choices
The town I live in has Walmart and Food Lion, and a few dollar stores that offer little in the way of meat or produce.
If I want to go to Aldi's which is cheaper than Walmart or Food Lion (one of Giant's lower-tier subsidiaries) and has meat and produce, I have to drive 30 miles. Same for Martin's (one of Giant's more upscale subsidiaries).
No, there is not plenty of competition. Your small-town experience is not everyone's.
By making a generalization about the availability of choices.
an error on my part. kroger bought safeway and are in court now to buy albertson's.
I didn't see any facts - just your opinions for the most part.
Sure you did. TG told you she didn't have those options yet you still stated your opinions/not facts.
"Plenty of competition and pressure for lower prices and we are seeing lower prices"
Who are the we in your comment/opinion?
"Anyone who thinks price gouging will be ended by telling people to go to a different grocery store 4 or 5 miles away is deluding themselves."
or 10 or 20 or 30
The reported reason why Kroger is trying to buy up Albertsons is so they can match up to the Walmarts / Costco's / Amazon to increase their negotiating power and lower distribution costs. As we're not sitting in board rooms we don't have the real reasons. How this merger will impact food costs across the board are at this time unknown but there's a lot of speculation around them.
why does my kroger discount card work at safeway?
I am not surprised I didn't make it clear enough the facts are that those multiple stores exist withing 10 miles of my house and very few folks live in villages smaller than the one I live in.
Those were the facts that you didn't see
clear as mud
.......'as we're not sitting in BOARDROOMS, we don't have the real reasons'.
lol
Interesting. His profile on a business related site I’m a member of says his title is: Director Retail Insight & Strategy at Kroger.
Fancy way of saying Director of pricing? Hmmmm.
It's kind of hard to decide which duplicate seed to comment on .
Kroger's is probably just the tip of the iceberg.
Here in the nation's Capital, the two poorest wards are losing grocery stories. Apparently the wind fall profits from price gouging are an insufficient incentive to keep the lights on.
There is now only one full-service grocery store serving tens of thousands of residents in Ward 8, east of the Anacostia River and Giant is considering closing it. They have removed brand named products from the shelves and prohibit shoppers from entering the store with large bags.
Since theft is up across D.C., they wonder why the company would single out this remaining store given the harm it will do to the community. Isn't it obvious, racism over obscene profits.
A different point of view - seems possible that he is right
The chief executive officer of Kroger insisted Wednesday that merging with rival Albertsons would allow the two supermarket companies to lower prices and more effectively compete with retail giants like Walmart and Amazon.
Kroger CEO Rodney McMullen argued in favor of what would be the largest grocery chain merger in U.S. history while testifying during a federal court hearing in Oregon on the U.S. government's request for a preliminary injunction that would block the $24.6 billion deal.
“The day that we merge is the day that we will begin lowering prices,” McMullen said while under questioning by a lawyer representing his company.
The two companies proposed joining forces in October 2022 after Kroger agreed to purchase Albertsons.
Kroger CEO insists Albertsons merger would lead to lower prices | wkyc.com
monopolies always work out so well for producers and consumers... /s
I don't see how this will work in favor of the producer and consumer. I mean, they're admitting to gouging now.
'How does that 'seems possible that he is right' make sense????
This is not going to be a monopoly, because Kroger/Albertsons would not be the sole provider/controller of groceries.
The definition of monopoly (if the actual fact about a monopoly matters to any of you)
you're living in a fantasy land if you think that there isn't any pricing manipulation or collusion, especially when it's among only a few competitors.
Every type of business that does much business at all has an "Association" that holds "Industry Conferences" and that funds government lobbyists and consultants who write legislation.
Isn’t that one of the problems with a central government that can economically impact businesses to a large degree? Only the wealthy businesses can afford the lobbyists and lawyers to shape and understand or laws to their advantage.
If the actual truth means anything to you.
What "central gov't" are you referring to? The U.S. (Federal) gov't? Or the state governments?
Don't forget-- there are some large, powerful unions as well (who also have lobbyists).
I retired from my day job some time ago. But I'm still a member of my union. (For a while I was the equivalent of a "shop steward" for a year--I represented my place of work in dealing with local "management" ) Usually both sides got along pretty well. But then we had a new boss that was difficult. I was pretty good at my job as union rep but couldn't get anywhere-- so I called in the district rep of the union (who, surprisngly, handled it very well).
My union is an "Association"-- we hold "Industry Conferences" (although we call then "union Conferences". The union also hires "lobbyists" (although we don't call them that).
At the higher levels our union district reps (and higher) "negotiate" with elected politicians to help pass strong "Pro-union" representation.
In one statewide election, the candidate supported by my union (in cooperation with other unions of course) help win the governorship for the candidate we backed!
Some unions are very powerful-- others, not so much!
That's a bit of an over-generalization. Many times true-- but if itsa solidly Republican district, Democratic support may not be all that important.
As a generalization, most unions are heavily Democratic, but many supporters of management are Republicans. But there are exceptions...
(I no longerfollow these things too closely, I could be wrong but IIRC, at leaset at one time the Teamsers were somewhat "pro-Republican"-- or maybejust not as"pro-Democrat" as most unions are.
Good point. Unions are people too my friends
What they fail to acknowledge is that there is already significant government in place to combat such things and yet, after four years in office, the Biden admin and by extension Harris, used it little. I guess they felt the problem wasn’t there. Not until they broomed Joe and instilled the second coming of the chosen one did they start getting really serious about it.
Four years, nothing. Running for office? We suddenly have a massive price gouging problem causing inflation.
And I have a slightly used bridge for sale connecting upper and lower Michigan.
Cheap.
Freshly painted, ready to go …..
gee, do you think the maga christo-fascists in congress would vote for the any measures to correct it?
And this:
sez it all
[✘]
[deleted][✘]
Yes, seriously weird brain dead lying people...
= MAGA!
Thanks JBB for filling my blank spots, I had failed to see that perspective.
Exactly!
All mergers are not the same. Some actually allow the new (merged) entity to operate more effiiently-- and even lower prices! ("Economy of scale" for one thing...).
Other mergers don't work out so well at all.
That is what this is - one of those 'other mergers that don't work out so well at all' for the consumer
Rarely if ever doe ……, SODDD.