They are not telling the story of food price inflation

[jmbar2]

64. Good question - made me do some digging...

Ran across an interesting explanation that was new to me, but apparently known all the way back to Adam Smith.

Companies have 3 choices when they receive cost increases. They can absorb and take a hit on their margins. They can pass through and share the pain with customers. Or they can put an additional mark-up above and beyond the rate of cost increase, padding their margins at the expense of customers. Up and down the value chain, this profit-driven model is responsible for over 50% of consumer price inflation. And without profit inflation, price increases would be tracking more closely with wage growth.

The Price-Profit Spiral:
An economic analysis by The Roosevelt Institute concluded that shareholders favor conglomerates with large market share because they are able to both raise prices and retain customers: “Firms increased their markups substantially in 2021, both to their highest level and with the largest single-year increase since 1955. Firm profitability, both before and after taxes, also increased to its highest levels… a phenomenon that could be described as a price-profit spiral.

Adam Smith, author of The Wealth of Nation recognized this dynamic early on in the development of capitalism. “High profits tend much more to raise the price of work than high wages. Our merchants and master-manufacturers complain much of the bad effects of high wages in raising the price. … They say nothing concerning the bad effects of high profits. They are silent with regard to the pernicious effects of their own gains. They complain only of those of other people.”

https://www.forbes.com/sites/errolschweizer/2022/09/12/how-profit-inflation-made-your-groceries-so-damn-expensive/?sh=16fdbb892eb9