On Friday, Sen. Elizabeth Warren (D–Mass.) tweetedHere’s a clip from her MSNBC appearance Stephanie Ruhle ReportsA few days before.
What happens when you have only a handful giant grocery chain chains such as @KrogerDo you have the power to dominate an industry? These corporations can impose high food costs on Americans and make record profits. Our antitrust laws must be strengthened to prevent the collapse of giant corporations, and allow for lower prices. pic.twitter.com/DMa9Z7adFr
— Elizabeth Warren (@SenWarren) January 7, 2022
The caption asked “What happens when only a few giant grocery stores like Kroger control an industry?” These giant grocery store chains can impose high food costs on Americans and make record profits. Warren stated that “a few giant chains” have replaced the large number of small stores scattered across the American landscape. She called on the government to use its antitrust powers to “break down these huge corporations.”
The senator was already familiar with this topic. In December she wrote to Kroger and Albertsons. She criticized the supermarket giants for “passing on costs to consumers to preserve your panademic gains” as well as “taking advantage inflation to increase burdens.” While grocers had seen their profits rise during the pandemic and they had not used that money to “lower prices” or “protect consumers,” the letter stated.[ing]Compensat[ing]Their workers.”
Warren could not have selected a more deplorable industry to be an example of: Grocery shops consistently have one the highest profit margins among all economic sectors. Aswath damodaran, New York University’s finance professor, found that retail grocery stores have an average of 1% net profit. Kroger posted a profit margin 0.75 percent in its latest quarter. Warren claimed that Kroger is “expanding profits because of its market dominance.”
Groceries saw a huge increase in revenues, but they have not seen increased profits over the course of the year. All Costs have risen, not only for products but also transportation and employee compensation. Couple that with persistent inflation—which Warren also recently blamed on “price gouging”—and it is no wonder that things seem a bit out of balance.
Warren has always been an advocate of antitrust laws. She called on 2019 to use the antitrust laws against retailers from selling her own products as part of her presidential campaign. While this would be detrimental to industry leaders, such as Amazon or Walmart, ironically it would also impact grocery stores: Grocers increasingly depend on their own products for cheaper options. It provides consumers with cheaper options and lower prices for the store. These stores also serve to fill the supply gaps that are created when there is a shortage of goods.
Warren wants to really reduce the cost of groceries in America. The solutions to this problem are simple: Reduce inflation through cutting back government spending, remove protectionist barriers to help industries get their supply chains back on track, and, in the long term, lower red tape in order to increase competition between suppliers. While these fixes are not as dramatic as “breakup Big Grocery,” they still reflect the reality.