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White House Opposing Alleged High Grocery Retail Margins

02/07/2024

During a political rally in South Carolina, the President claimed that despite a decline in inflation, the cost of grocery items is still too high, claiming “price gouging is going to stop”.

 

Whether valid or not, the President in his campaign for reelection must dispel the notion that the economy has not improved despite considerable economic data that demonstrates progress in reducing inflation and increased productivity and wages.  Comments such as “ripping people off, price gouging, junk fees, greedflation, shrinkflation” are pure political rhetoric. The claims of excessive margins are not supported by the relatively low gross and operating margins posted by pure-play grocery chains. For the 9-months of FY 2023 Kroger posted a gross margin of 22 percent and an operating margin of 1.6 percent.

 

The current policies of the Administration suggest that the FTC will disfavor the proposed merger between The Kroger Company and Albertsons.  Even if the Agency allows the transaction, it will in all probability impose extreme penalties on the parties and require divestiture of more than 400 stores and may designate a more eligible and substantial acquirer than the company selected.

 

Competition may play a role in grocery prices given the differences in the rate of inflation as measured by Consumer Affairs.  As of December 2023, consumers in Pennsylvania faced an 8.2 percent rise in grocery prices compared to Colorado at 2.9 percent with extreme variation among cities within states.