Ongoing food inflation is an issue brought about by a multitude of factors: the global pandemic, the war in Ukraine, labour and skill shortages and more controversially, by corporations profiteering across the supply chain.
‘Greedflation’ refers to excessive price increases driven by a desire to increase profit margins rather than genuine cost factors. Supermarket chains are under fire for exploiting inflation and profiteering. This is particularly controversial considering the cost-of-living crisis.
Unite general secretary Sharon Graham blames profiteering right along on the food supply chain for leaving the British public ‘hostage to greedflation’. Unite, in their latest report, show that supermarket giants Tesco and Sainsbury’s saw their highest profit margin in 2022 than in the last eight years.
There are fundamental issues when it comes to proving the validity of ‘greedflation’ accusations. Accusations rely heavily upon financial reports which demonstrate small and decreasing profit margins in recent months. Sainsbury’s saw profit margins fall from 3.4% to 2.99%. Similarly, Tesco’s commercial director Gordon Gafa claims that the chain has made “7% less profit than the previous financial year”. This would leave little room for further price cuts until wholesale cost reduction trickles through the supply chain.
Accusations that rising food prices are down to profiteering can also be countered by the argument that chains are performing anticipatory price-setting due to the expectation of higher costs of production in the near future rather than any intentional profiteering activities. A report from the Kansas City Federal Reserve finds this pattern of profit in every US recession going back to 1948 with the pandemic recession being no exception to this.
This argument perhaps removes too much accountability from supermarket chains. The government enquiry on 27th June will be sure to spotlight any instances of supermarkets profiteering using evidence from Unite and the European Central Bank who have both released recent reports on 4 major supermarkets financial activity.
Whether prices have risen due to the corporate conspiracy of profiteering or due to the knock-on effects on the economy that the global pandemic and war in Ukraine caused; it is important to guide shoppers on how to save money on their weekly food shop. This is particularly important as a disproportionate burden of the effects of food inflation falls onto low-income households. A report from market analyst Kantar shows that supermarket price inflation has added £837 to annual household bills on average.
Shoppers should avoid impulse purchases by eating before big shops and setting a food budget. According to ICG figures 63% of people entering the supermarket haven’t yet decided what they are going to buy. As well as this, shoppers should set up loyalty cards, shop at more cost-beneficial local markets and stock up on long-life products when they are on offer.
A more proactive governmental approach to market intervention is one way that potential profiteering and rising food prices could be tackled. These strategies could include price stabilisation measures on essential food items and prevention of monopolistic behaviour by imposing penalties for unfair pricing practices and excessive markups.
So, do you think that supermarkets are profiteering? Or are they operating at the margins as they claim and innocent to ‘greedflation’ accusations? We’d love to hear your thoughts on social media!
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