Disaster Capitalism, Food Edition

This unprecedented price inflation is a major departure from the American grocery industry’s reputation as an efficient provider of cheap, convenient, and abundant food. In the wake of World War II, Public subsidies underwrote massive industry infrastructure to feed the troops overseas. The sunk costs were reallocated to provision the postwar economy with packaged, processed, calorically dense, ubiquitous nom-noms, which flourished into the permanent wartime pantry that we now take for granted as the Great American Diet. This diet wasn’t particularly healthy for our bodies or our environment. But by the criteria of price, variety, and satiety, it worked well for decades, making the US food supply “the envy of the world.”

Over those decades, the American grocery industry also generated enormous profits for an ever-consolidating cohort of food companies. When the COVID-19 pandemic hit in 2020, these food conglomerates jumped at the chance to raise prices. Pandemic supply chain bottlenecks were real, but these companies took liberties as well, using them as an excuse to hike costs, reduce unit volumes, and bring in record-setting profits. In the years that followed, as pandemic aid programs evaporated and interest rates shot up, poverty and food insecurity skyrocketed. American food was now no longer cheap, convenient, or abundant.

Jacobin’s holiday list provides ample examples. Since 2021, meat prices are up 30 percent and volumes down 8 percent. Four conglomerates control up to 85 percent of these markets, and in that same timeframe, their profits surged by 120 percent while their net income rose by 500 percent. The Big Four meat processors paid out over $4 billion in shareholder dividends in the first two years of the COVID-19 pandemic.

Soda prices are up 46 percent, and volumes are down 0.59 percent. The top three soda companies control over 80 percent of the marketplace, with the top two firms controlling over 50 percent share in many metro areas. As the CEO of PepsiCo stated in 2023, “I still think we’re capable of taking whatever pricing we need.”

Chocolate prices are up 40 percent, and volumes are down 9 percent. The top three —  Hershey, Mars, and Mondelēz — have almost 30 percent market share. Meanwhile, bread prices are up 25 percent, and unit volumes are flat. The top five brands have 48 percent market share. Two conglomerates, Flower Foods and Bimbo Bakeries, own a vast array of household brands like Wonder, Nature’s Own, Dave’s Killer Bread, Thomas’, Sara Lee, and Arnold’s.

Salty snacks unit volumes have flatlined, and prices are up 27 percent. The top five brands have over 33 percent market share. Frito-Lay alone controls 50 percent snack market share in dozens of metro areas. Turning to the media’s favorite metric of price inflation, egg prices are up 130 percent, including 45 percent in one year, and volumes are down 1.37 percent, due to avian flu, pullet supply constraints, and record profits from United Egg Producers.

Coffee prices are up 28 percent, and volumes are down 9 percent. The top five brands have over 53 percent market share. Cookie and cracker prices are up 33 percent, cookies are down in volume 8 percent, and crackers are down in volume 16 percent. The top five cookie and cracker brands control almost 70 percent of the marketplace, with the top two companies controlling over 50 percent.

In 2022, the four companies that control 70 percent of french fry production raised prices within a week of each other. French fry prices have increased by 56 percent since 2019.

Leading retailers jumped at the chance to pad their margins. From April 2019 to the summer of 2022, Walmart raised thousands of prices on a cost-per-ounce basis, well above the rate of inflation. At Albertsons stores in the same timeframe, a basket of like items on a cost-per-ounce basis jumped by over 75 percent, also well above the annual rate of inflation. On the stand testifying under oath during their Albertsons merger Federal Trade Commission (FTC) trial, Kroger executives admitted to raising milk and egg retail prices above the rate of cost inflation. This was an aberration: milk and eggs are typically “key value items” that form price perception and anchor retailer pricing strategies, not used to pad margins. But in the new grocery landscape, the old rules don’t apply.

Publicly, the corporate line was that supply chains were still disrupted, inflation was raising production costs, and companies’ pricing was just a matter of keeping up with economic trends. But in other venues, as economist Isabella Weber explained in 2022, companies “bragged about how they have managed to be ahead of the inflation curve, how they have managed to jack up prices more than their costs and as a result have delivered these record profits.”

In 2021, food company profit growth outpaced wage growth by 671 percent at Albertsons, 333 percent at Amazon, and 83 percent at Keurig Dr Pepper. Stock buybacks as a percent of profit were 38 percent at Walmart, 52 percent at Target, 117 percent at Dollar General, and 50 percent at Kroger.

Likewise, profits outpaced revenues by 17 times at Albertsons, 4.5 times at Kroger, and 3.5 times at Target, while CEO pay topped nearly 1,000 times the average employee compensation.

In 2023, at the height of price inflation, Walmart’s profits were $15 billion, Nestle’s were $13 billion, Coca-Cola’s were $10 billion, PepsiCo’s were $9 billion, Unilever’s were $8 billion, Mondelēz’s were $5 billion, and Kroger’s were $2 billion. A March 2024 report by the FTC noted that market-leading food and beverage retailers saw their revenues outpace their costs by more than 6 percent in 2021 and 7 percent in 2023.

Companies claimed that their prices were following inflation, but many economists looking into the matter found otherwise. The European Central Bank, the Organisation for Economic Co-operation and Development, the European Commission, and the International Monetary Fund all published studies on profits driving inflation, while the Groundwork Collaborative and the Economic Policy Institute found that over 53 percent of price increases from 2020 to 2022 were driven by profit gains.

Shareholder wealth grew by 57 times as much as worker wages. Not surprisingly, many of these same food companies pay much of their workforce far less than a living wage.

Flush with cash, despite lower consumption volumes, the food industry went on a consolidation binge. Mars swallowed Kellanova, Ferrero consumed Kellogg’s, Smuckers snacked on Hostess, Celsius chugged Alani Nu. Kraft Heinz disaggregated into category-focused monopolies, General Mills sold its US yogurt monopoly to Lactalis, and Flower Foods acquired Simple Mills. Tyson announced closures and layoffs at two massive meat processing plants. Private equity gobbled up TreeHouse Foods. PepsiCo bought Siete Foods and Poppi, and is now closing Frito-Lay and Pepsi facilities due to declining consumption volumes, all while Amazon, General Mills, and Target laid off thousands of employees. Walmart, the all-consuming void at the heart of grocery, increased its market share by nearly two points, now comprising nearly 30 percent of US grocery sales.

Meanwhile, retailers are now working harder to sell less product. They’re trying everything they can to court and retain customers who are increasingly saddled with price increases due to the industry’s post-pandemic profit bonanza. They are introducing everyday-low-price private labels and selectively lowering some prices and marketing the hell out of that while raising others. (Exhibit A: Walmart’s Thanksgiving promotional deal, which Trump cited as evidence of grocery prices falling.) They’re also increasing chargebacks, fees, and markdown requirements from suppliers, while using artificial intelligence to “optimize” pricing.

But this is all just rearranging deck chairs. The grocery business, in its current incarnation, can’t solve the affordability crisis. To get out of the mess it made, we’ll need to get creative.

The Public Grocery Option

Continuing on this path ensures that grocery prices will continue to rise, consumers and workers will continue to be squeezed, and CEOs and shareholders will continue to hoard ever more wealth. What would an effective overhaul look like, one adequate to meet the nutritional needs of Americans at a price they can afford, with food they enjoy and look forward to? At its core would be public underwriting, the very thing that kick-started the original model that worked so well.

First, to ensure a level playing field for the public sector, regulators can start by enforcing the Robinson–Patman Act (RPA) to clamp down on how bigger chains command better deals, fill rates, and payment terms at the expense of smaller competitors, workers, and consumers. Without such antitrust enforcement, a burgeoning public sector would be subject to the same price discrimination as smaller retailers. A next step could be something like the Emergency Price Stabilization Act, first introduced by former congressman Jamaal Bowman in 2022. This could selectively use price controls to limit price increases in key goods and services. It would dovetail well with a national price-gouging ban, such as that proposed by the Kamala Harris–Tim Walz campaign in 2024.

The next order of business would be to beef up public subsidies for food — in other words, supercharge the Supplemental Nutrition Assistance Program (SNAP). SNAP currently accounts for about 9 percent of grocery industry revenue, or $100 billion a year. Current SNAP benefits add up to $190 a month for an individual and $351 for a family of four, which is not enough anywhere in the United States for a healthy and enjoyable diet. Supercharging SNAP would mean making all fresh produce free — yes, you heard me, universal free produce. This would cost about $90 billion a year in retail price subsidies.

On top of that, we’d want to subsidize the difference in total retail prices between 2019 and 2025. This would cost about $225 billion in public subsidies. All in, this adds up to about $400 billion. That may sound like a lot, but seen another way, it’s only the difference in defense spending between 2015 and 2025. Surely basic nutrition is as valuable to our society as defense.

A public grocery option is next. Public groceries hit the mainstream with Zohran Mamdani’s successful mayoral campaign in New York City. The good news for boosters is that it already exists at scale in the US military’s commissary system. The military commissary system underwrites the gross margins of retail operations so that retail prices are 20 to 30 percent lower than grocery prices. The military commissary generates over $5.6 billion in annual sales and leverages large-scale buying power to ensure low wholesale costs and a great selection.

The commissary system is well-loved by US service members. An army officer friend summed it up to me, saying, “Always less expensive. Good food. There should be a push for public PX-style grocers across the country.” In New York City, there is a commissary at Fort Hamilton, in the Bay Ridge neighborhood of Brooklyn. This market has 193 ratings on Google Maps, averaging 4.6 stars. The commissary system is proof that the government can operate efficient, popular grocery stores that customers genuinely appreciate.

What such public grocers sell is up for discussion, but over a dozen cities already have well-established values-based purchasing programs that prioritize fair wages, human rights, animal welfare, environmental sustainability, and community benefits. Public grocers could leverage existing advantages of scale — such as in New York City, where public institutions already purchase over $500 million in food a year — or form purchasing cooperatives between municipalities, just like private, independent grocers do to bring down costs and compete with Walmart.

The math behind affordability is this: leverage scale to bring down wholesale costs on a limited assortment, then subsidize the retail margin. Following this logic, which was pioneered in the private sector but extends naturally to the public sector, public groceries could be the best and cheapest groceries out there.

There is ample precedent for this idea. Depression-era New York City mayor Fiorello La Guardia built a network of city-run indoor markets, and six of these La Guardia markets still operate today as partially subsidized retailers.

Outside the United States, the idea is far from unusual. India’s Public Distribution System (PDS) distributes subsidized food and nonfood items to India’s poor. Istanbul’s nonprofit stores sell food at or below cost. Bulgaria’s government has announced plans to create a network of 1,500 stores. In South Korea, public investment in “precautionary” supply chains ensures that public institutions have access to healthy products.

Mexico has 25,000 basic goods outlets, with plans for 30,000 tiendas bienestar (well-being stores) by 2030. Brazil has pulled out all the stops to address poverty and hunger: cash transfers, a universal school meals program, an increase in the minimum wage, public procurement from family farmers, and granting every Brazilian the human right to adequate food in national law.

Over 83 percent of Americans also think that food should be a human right. The remaining question is what we will do to ensure it.

Faye Guenther, president of United Food and Commercial Workers (UFCW) Local 3000, put it well, saying:

Over the last four decades the supermarket industry has become highly concentrated and the power of workers and consumers has been dramatically reduced. We need a public option in the supermarket industry — stores that are focused on providing healthy food in our communities, while providing jobs with good wages and benefits.

But public sector retail is just the start. A more ambitious vision could also include public sector investment further back in the supply chain — in wholesaling, processing, and manufacturing. Even home delivery, which is rarely profitable for grocers, could be treated as a public service. Such a model could operationalize the right to food, bringing it out of the realm of an abstract principle and into the realm of an actual material entitlement. Where markets can’t or won’t serve basic human needs, where profit takes precedence over provisioning, public groceries can solve the affordability crisis, ensuring good food for all.