Americans Are Struggling With Inflation. Corporations Are Not.

Whether eggs, flour, or baby formula, the household goods that have seen some of the steepest price increases and majorly squeezed average Americans have also made their manufacturers incredible amounts of profit.

Increased prices of eggs are seen at egg shelves at a grocery store in New York on January 21, 2023. (Fatih Aktas / Anadolu Agency via Getty Images)

Everyone’s struggling through the inflation crisis, we’re told — even big business. In fact, it’s because of the higher costs corporations are weathering, whether from higher fuel prices, supply chain disruptions, or shortages caused by freak events, that the rest of us have to pony up more when we finally get their products in our hands. The most recent consumer price index (CPI) figures show just how dramatically the prices of all sorts of ordinary household goods have gone up over 2022, as businesses have passed their higher costs on to consumers.

But is that really the case?

Mounting evidence suggests that far from simply passing on their own higher bills, US corporations are profiting off the inflation crisis, using it to jack up prices well above what’s necessary. How else can you explain these firms’ rosy financials — or that their own records all but outright say as much? A few of the goods included in the CPI that have seen the steepest rises illustrate the point.

Eggs: Up 70.1 Percent

Eggs have become so outrageously expensive, they’ve sparked a new term: “egg-flation.” That rise has also sparked some outrageously high profits for Cal-Maine, the leading egg producer and distributor in the United States. Cal-Maine’s gross profit grew to $337 million in FY 2022, more than double the $160 million it posted the year before that and well above the $179 million of the year before that.

Some of that was due to a bird flu outbreak in the fourth quarter that meant the supply of eggs took a hit, raising prices. But profit was also high the quarter before that outbreak, “primarily” due to higher egg prices, according to the company’s own SEC filing. And by the time the company was posting record profits in the back half of 2022, the higher feed and processing costs that COVID disruptions and the Ukraine war had triggered only “partially offset” the “higher selling prices for conventional eggs” that had led to the company’s stunning earnings, the company’s other filings tell us.

Elementary and Secondary Schools Food: Up 301.9 Percent

The United States is the only country where “lunch debt” at schools is a thing, and it looks like that perverse problem is only going to get worse with the massive rise in the cost of food at schools. Whether it will cause the executives of the “Big Three” K-12 food service companies to lose any sleep is an open question, since it’s been very good for their bottom line.

After a dip in 2021, Sodexo’s revenues have bounced back to roughly their pre-2020 peak. The company is starting FY 2023 strong, with revenues growing strongly in North America. CEO Sophie Bellon explicitly connected this growth to “price increases,” among other things.

“Revenue and profits have been on the rebound,” says Aramark’s CEO, with the company pointing to pricing as a driver of the fact that its revenue is now at 111 percent of its pre-COVID level. Meanwhile, Compass Group highlighted the “strong” organic revenue growth for the year in its 2022 annual report, noting it was finally positive after the two previous years of decline and far eclipsing the growth seen in 2018 and 2019 — something it partly ascribed to “higher levels of pricing.”

Utility Gas Service: Up 26.7 Percent. Electricity: Up 11.9 Percent

It’s not a great time to be cold in the United States. A whirlwind of factors has driven up the price of gas, the largest source of electricity generation in the country, leading the cost of home heating to skyrocket. As a result, by August 2022, roughly one in six US families were behind on their utility bills, to the cumulative tune of $16 billion.

It has been good to be a US utility company, though. According to corporate watchdog Accountable.US, the nine largest utility companies have seen their net incomes rise by nearly $250 million to more than $13.8 billion over the first three quarters of 2022 alone, even as many of those companies have moved to sharply hike rates on their customers. Right this minute, Michigan’s DTE Electric Co. is looking to hike rates by as much as double-digit percentages, even as its customers have had to deal with chronic outages as a result of underinvestment in the electric grid.

At times, they’ve been open about the fact that this windfall was helped along by higher prices. Pricing was one of the “earnings drivers” for the third quarter 2022, Southern Company revealed in an earnings release. The two segments of NextEra Energy “had a terrific year in 2022 and both businesses have never been better positioned,” the company’s firm told investors in a fourth-quarter earnings call, explaining that “natural gas prices have seen an increase over the past year with volatility likely to continue going forward.” Meanwhile, Constellation Energy listed in a February 2023 earnings call “higher realized energy prices” among four “drivers” of what it predicts will be even higher earnings this year.

Flour: Up 20.4 percent. Bread: Up 14.9 Percent

Bread is usually synonymous with basic, no-frills sustenance. Yet the cost of flour and bread has surged so high, even this fundamental, staple food is now causing people serious financial stress. The disruptions of the war in Ukraine has helped fuel this, but that’s far from the whole story.

In the most recent quarter, Conagra — which owns 44 percent of Ardent Mills, the country’s largest flour miller — recently posted large increases of 27.9 percent and and 21.5 percent for its net income and earnings, respectively. The company declared this was “driven primarily” by “a strong performance” from Ardent. Conagra tends to cite “favorable market conditions” for this performance in its filings, but its CEO more specifically told investors last year that “effective management” at Ardent “allowed [it] to capitalize on volatile market conditions.” In a February 2023 presentation, the company showed that its pricing generally far outpaced inflation the past two quarters and has elsewhere stated that strong margins were “driven by inflation-justified pricing.”

Archer-Daniels-Midland (ADM) Company, the second-largest flour milling company in the United States, has similarly seen operating profits for its Carbohydrate Solutions segment — which makes, among other things, wheat flour — rise 6 percent since 2021, and it chalks up the 26 percent jump in revenue for the segment mostly to “higher sales prices.”

Baby Food and Formula: Up 10 Percent

The picture is more complicated on the baby food front, which was already the source of havoc once for American families in 2022, after corporate irresponsibility from manufacturer Abbott Laboratories led to an alarming baby formula shortage early in the year. Indeed, Abbott recorded steep drops in its earnings and profit margin as a result of the manufacturing stoppage and product recall it was forced to carry out, which was only “partially offset” by “select product price increases,” according to its annual report.

But this wasn’t the case across the board. The chief financial officer of Nestlé, one of four companies that dominates infant formula production in the United States, noted in a conference call earlier this month that North America had seen its operating profit margin go up seventy basis points over the year.

“Pricing, growth leverage and portfolio management more than offset significant cost inflation,” he said.

Similarly, Kraft Heinz may have seen its profits drop from 2021, but its operating income rose, “primarily driven by higher pricing” that, combined with other factors, “more than offset higher supply chain costs,” according to its annual report.

Airline Fares: Up 25.6 Percent

Finally, the pain faced by air travelers across 2022 was airline operators’ gain, as numerous airlines reported a return to profitability after a two-year-long, pandemic-induced slump. While airlines reasonably pointed to a surge in demand from travel-starved customers in the era of vaccines and reopening to explain this, the inflated ticket prices they were forcing people to pay no doubt helped, too. Both United and Southwest reported an upsurge in revenues despite operating at lower capacity than previous years — a record operating revenue of $23.8 billion, in Southwest’s case.

In earnings calls, executives have made clear these rising airfares aren’t all due to fuel price increases. Delta Airlines president Glen Hauenstein told investors that a “structural shift to premium” seats, which have been “much more resilient through the pandemic,” are “key to managing through inflation and economic cycles,” whereas “more price-sensitive products” like basic economy “have struggled to keep up with inflation” — which is why Delta was expressly limiting the share of basic economy customers who could be on a flight to 20 percent at most, he explained. In a different call, when asked if the plan to keep offering higher fares was triggering any pushback, Hauenstein said that “robust demand” meant there was none.

“We’re right now in the mode of trading traffic for yield,” he explained — meaning, focusing on selling fewer, but more expensive tickets, than running planes full of customers who had bought more affordable options.

American Airlines executive Vasu Raja explained the thinking in one of his company’s earnings calls, after he was asked if he was worried about the effect rising airfares might have on the business. “No, we don’t spend a lot of time worrying about it,” he said, because American tries to “create the most value for our customers. And when they like it, they pay us for it.” There was “so much demand that’s surging back into travel,” he went on, because “consumers really like what they’re getting, being able to go and travel the world again,” and “that’s turning into relatively higher fares.”

In a different call, Raja explained that demand was “accelerat[ing] at a pretty unprecedented rate,” and as a result, “we are seeing a lot of strength in a fare environment with customers who frankly value quality of product [sic] that we have and are willing to pay us.” American hit record revenues of $49 billion in the last financial year, including its highest ever fourth-quarter revenue.

Daylight Robbery

These are only a few of the many goods listed in the CPI that have seen sharp increases over the past year. Yet without exception, the largest firms responsible for manufacturing and supplying them have seen massive, sometimes record financial windfalls over the same period, with the companies themselves at times outright admitting they’ve raised prices higher than they needed to. It would be surprising if this pattern was simply limited to these six, random goods. More plausible is that it holds across many more, maybe even most, of them.

Yet corporate profiteering as a factor in our inflation woes remains little discussed in politics and media, even as the Federal Reserve continues on with its plan to tackle inflation by killing jobs, to the point of potentially engineering a recession. Many factors contribute to inflation. Before we start throwing people out of work, why not first focus on those, like corporate malfeasance, that would do the least harm?