From the article: ... ... ... ... The article's vibe is that this is unfair to smaller grocery chains and certainly it does seem that way from their point of view, but one thing this shows is that...
From the article:
Grocery prices — which have jumped about 21 percent since July 2020 — have spurred finger-pointing in every direction: retailers, suppliers, policymakers. As a proxy for many people’s view of the economy, food costs stand to play prominently in the November election, and in three court cases attempting to block the $24.6 billion merger of grocery giants Kroger and Albertsons. The first, launched by the Federal Trade Commission, eight states and the District of Columbia, begins Monday.
But independent grocers, routinely the only option for fresh food in poor rural and urban communities, are especially vulnerable in this climate. Though there is no national database for such stores, a dozen business owners and experts who spoke to The Washington Post say their risks have been compounded by the rapid expansion of dollar stores, growing power of big-box retailers and rise of dynamic pricing. Buche, for his part, has had to shutter three stores in the state in six years.
...
At Pine Ridge, which includes 32,000 members of the Oglala Sioux Tribe, Buche Foods caters to a region where unemployment hovers near 80 percent and more than half of the residents live below the federal poverty line, according to tribal leaders. Residents don’t have easy access to national retail chains — even Walmart, the nation’s largest food seller by far — requires a 55-mile drive to Chadron, Neb. But because only a fraction of the population owns a vehicle, most wind up paying someone for a ride to the superstore. The going rate is $25.
...
The run-up in grocery prices took root in 2020, early in the pandemic, amid a mix of supply chain bottlenecks and labor shortages, and later exacerbated by the war in Ukraine. Inventory scarcity was common even for big chains, but it was a particularly tough time for Buche, who said a baby formula shortage had him putting in 1,100 miles a week crisscrossing the state redistributing inventory from one store to another based on local need. Clorox wipes and children’s Tylenol were also hard to keep in stock, and he sometimes resorted to buying from Walmart and Costco to resell at a slim margin.
...
But even as supply chain logjams eased, prices didn’t fall in tandem. In 2023, 11.2 percent of consumers’ disposable income went to groceries, according to USDA data, compared with 8.6 percent in 2020.
...
[S]mall and regional retailers have proportionally higher upfront costs than their big-chain rivals, and it shows in their margins. Privately owned grocers reported a net profit before tax of 1.4 percent last year, down from 5 percent in 2020, according to research from the National Grocers Association. In the first three quarters of 2023, net profit margins for big-box and supermarket chains stood at 7 percent, according to an FTC study. Since the pandemic, the major chains have been operating at the highest profit margins on groceries in two decades, the White House Council of Economic Advisers said earlier this year.
Meanwhile, independents can’t secure the same volume discounts as their big competitors, and stores in remote areas have heftier costs because delivery requires more fuel and staff hours. Buche says he generally pays suppliers 20 to 40 percent more than he did five years ago, depending on the item. For example, a 24-pack of ramen went from $5.22 in 2019 to $7.63 in 2024, up 46 percent; and a case of Malt-O-Meal cereal jumped 28 percent to $35.41.
The article's vibe is that this is unfair to smaller grocery chains and certainly it does seem that way from their point of view, but one thing this shows is that profits and prices aren't related as closely as people think. The store with the higher profit margin can have lower prices. If you judge those stores based solely on prices, they're doing a better job at serving consumers. (But the article describes local stores where people pay more for convenience.)
There's an economic theory of Countervailing Power, which is basically that big organizations need to be opposed by creating other big organizations. Much like a union can sometimes get better deals for employees than they could individually, large retailers are a way of "collective bargaining" with suppliers to keep their prices down. The little guy can provide better service, but they don't have that advantage.
They usual solution is for smaller grocery chains to become bigger via mergers.
(Countervailing power doesn't always work. It seems to work for groceries, but not for health care?)
Countervailing power works best in situations where there are truly more choices and more time to select between them. A new car is a great example of where it works, and health care is a great...
Countervailing power works best in situations where there are truly more choices and more time to select between them. A new car is a great example of where it works, and health care is a great example of how it doesn't.
This is why I proposed the government getting into the grocery business; with the size of these grocery conglomerates, who else is big enough to be a countervailing influence?
It depends on where you live. Around here, off the top of my head, there are: Walmart, Target, Cosco, Safeway, Lucky's, Trader Joes, and several Asian and Hispanic groceries. I think blocking the...
It depends on where you live. Around here, off the top of my head, there are: Walmart, Target, Cosco, Safeway, Lucky's, Trader Joes, and several Asian and Hispanic groceries. I think blocking the biggest mergers would be good enough to keep competition going? A government grocery would be redundant.
It's the places without competition that are an issue.
But even in this area where we live, there are significant food deserts. All that competition, and there are still areas where the corner convenience store exists with no competition at all....
But even in this area where we live, there are significant food deserts. All that competition, and there are still areas where the corner convenience store exists with no competition at all. Talking about the diversity of brands in a metropolitan area obscures the actual competitive landscape, which needs to be tracked at a much more granular scale.
Not sure which places you're talking about, but I think it depends on transportation. If you have a car, I'm not sure there are food deserts in the bay area? Maybe "food desert" really means poor...
Not sure which places you're talking about, but I think it depends on transportation. If you have a car, I'm not sure there are food deserts in the bay area?
Maybe "food desert" really means poor transportation options, so people can't get to competing grocery stores?
Yes, food deserts are defined as low-income census tracts that are more than one mile from a supermarket in urban or suburban areas and more than 10 miles from a supermarket in rural areas. Lower...
Yes, food deserts are defined as low-income census tracts that are more than one mile from a supermarket in urban or suburban areas and more than 10 miles from a supermarket in rural areas. Lower rates of vehicle ownership and weaker public transportation systems do have a lot to do with it. Tying back into the larger point, the grocery stores that are most accessible to the people in food deserts have those people over a barrel. Even with a diversity of options across the broader cityscape, if you don't own a car every additional mile is a significant hardship.
This data is a few years old now, but here's what the Bay Area food desert map looks like, with half mile and 1 mile versions.
It seems like a pretty rough approximation, considering that it doesn't take into account public transportation at all. For example, you could have a bus stop right in front of your building that...
It seems like a pretty rough approximation, considering that it doesn't take into account public transportation at all. For example, you could have a bus stop right in front of your building that takes you directly to a grocery store, but it doesn't count.
Also, ten miles is not very far in rural areas if the roads are good. (Really far on foot though - that seems like a car-centric definition.)
Getting a more detailed picture would probably be quite a project - maybe Google could do it using their transportation routing data? Or using Open Street Maps? So I don't blame them for doing it that way; I'm just saying that sometimes the map is not the territory.
Conversely, smash up the big grocers into regional chains the way we did Ma Bell. Give them less power. We can see in hindsight that while Walmart was able to lower prices, the primary effect of...
Conversely, smash up the big grocers into regional chains the way we did Ma Bell. Give them less power.
We can see in hindsight that while Walmart was able to lower prices, the primary effect of doing so was destroying countless small businesses, suppressing wages, and lowering quality of goods.
Or failing that useful powercheck, pass a simple law that shops can only negotiate prices with suppliers as a class, such that the lowest price is automatically available to everyone.
You gotta decide which problem you care about more: grocery prices or small business. Because, if you choose small business, they need higher prices to survive, which is bad for their customers....
You gotta decide which problem you care about more: grocery prices or small business. Because, if you choose small business, they need higher prices to survive, which is bad for their customers.
Although, in many cases small businesses work because they can go upscale, catering to richer customers. There are a lot of people with disposable income, who will pay more without really feeling it if they like the service.
It's not an either-or situation though. You eliminate the ability for large players to gain competitive advantage from bullying suppliers. While they can probably still compete with slimmer...
It's not an either-or situation though. You eliminate the ability for large players to gain competitive advantage from bullying suppliers. While they can probably still compete with slimmer margins because of the increased volume, they won't be able to also leverage the purchasing power to extract that value from suppliers instead of customers.
There was a time when family-owned single-location grocers was the norm... and the groceries basically cost the same as they do now adjusted for inflation. That tells me that the supposed benefits of scale to the consumer were mostly a lie to instead pad the margins of the store owners.
As they do now at Aldi or Walmart or Hy-Vee or as they do now at the small town IGA or small town Dollar General? (The one with produce and meat) Because those prices are very different. And the...
and the groceries basically cost the same as they do now adjusted for inflation.
As they do now at Aldi or Walmart or Hy-Vee or as they do now at the small town IGA or small town Dollar General? (The one with produce and meat)
Because those prices are very different. And the food quality is too.
In aggregate according to whatever metric the Feds use. My point is that the introduction of megacorps being able to strongarm suppliers hurts more than it helps. Honestly I think no small part of...
In aggregate according to whatever metric the Feds use.
My point is that the introduction of megacorps being able to strongarm suppliers hurts more than it helps.
Honestly I think no small part of the problem is that industry is allowed to operate with too many secrets. Half of the arguements put forth by the free market types presume rational actors with conplete information to make informed decisions.
But that aggregate is using those large-supplier-negotiated prices currently. I can't afford to make a local grocer my primary shop. I can walk there for milk if we're out at dinner time but the...
But that aggregate is using those large-supplier-negotiated prices currently. I can't afford to make a local grocer my primary shop. I can walk there for milk if we're out at dinner time but the prices remain significantly higher.
I'm not convinced that suppliers, especially with transport costs, would sell for cheaper without large consolidated orders (especially ones that have their deliveries shipped to large warehouses and handle local distribution themselves.)
I agree that secrecy doesn't help but I don't think it'd change much in the math
If there were no large buyers with the pull to get better deals, suppliers could set much higher prices, and consumers would have no choice but to pay them.
If there were no large buyers with the pull to get better deals, suppliers could set much higher prices, and consumers would have no choice but to pay them.
Then stores can switch suppliers? Or customers not buy those goods? Again, this is a relatively new phenomena. Before antitrust was gutted by Reagan, supplier negotiations weren't nearly as big a...
Then stores can switch suppliers? Or customers not buy those goods? Again, this is a relatively new phenomena. Before antitrust was gutted by Reagan, supplier negotiations weren't nearly as big a deal. And gorceries wern't disproportionally more expensive back then, which disproves that the supplier negotiation is actually benefiting customers.
It seems like you’re assuming some kind of golden age of perfect competition in the hazy past when things were different. They were different in some ways of course. However, the idea with...
It seems like you’re assuming some kind of golden age of perfect competition in the hazy past when things were different. They were different in some ways of course. However, the idea with countervailing power is that because suppliers have become big businesses and can collude to keep prices higher, you need collective bargaining (via large retailers) to get good deals from them. This isn’t a new theory - it’s from American Capitalism by John Kenneth Gailbraith in 1952. Concerns about big business being anti-competitive go way back.
The post you link to gives a good example of that, where Walmart was able to convince Coca Cola to drop an artificial sweetener. That’s what a big retailer can do. Otherwise, who would have stopped Coca Cola? Your small grocery store isn’t in a position to do that. They’re not going to negotiate with Kraft. (Furthermore, grocery stores banding together to negotiate collectively with suppliers is legally dubious. It would be an example of illegal collusion. Unless, of course, there’s a merger.)
I’m not sure Gailbraith was writing about groceries and I don’t know enough about the grocery business (past and present) to do more than share my general impressions, which are fairly limited. But I don’t think you’ve proven anything, and we aren’t going to settle this using this kinds of very broad historical arguments.
Regional chains can still hold a near-monopoly in a given region. It's a good step, but doesn't necessarily fix the price for the consumer. I do like the idea of standardized prices across the...
Regional chains can still hold a near-monopoly in a given region. It's a good step, but doesn't necessarily fix the price for the consumer. I do like the idea of standardized prices across the board; prices would still vary some, given shipping costs, but it would at least even out costs within a given region. But even then, if a larger player can buy up all of a given producer's stock it doesn't matter if the price is the same across the board.
It's true, but their power will at least be diminished somewhat, and will be more tangible long term if we can prevent them from katamariing themselves back together after.
It's true, but their power will at least be diminished somewhat, and will be more tangible long term if we can prevent them from katamariing themselves back together after.
Absolutely. Maintaining competition is vital. The challenge is that anti-trust action has to be maintained indefinitely or they will merge back together. It's a hard thing to maintain over decades.
Absolutely. Maintaining competition is vital. The challenge is that anti-trust action has to be maintained indefinitely or they will merge back together. It's a hard thing to maintain over decades.
Disclaimer: I plan on voting for Harris no matter what. My opinion is that convicted felon Trump completely ignored this issue. I also feel that the Biden administration completely ignored the...
Disclaimer: I plan on voting for Harris no matter what.
My opinion is that convicted felon Trump completely ignored this issue.
I also feel that the Biden administration completely ignored the issue of consumer prices until very late in his administration.
From the article:
...
...
...
...
The article's vibe is that this is unfair to smaller grocery chains and certainly it does seem that way from their point of view, but one thing this shows is that profits and prices aren't related as closely as people think. The store with the higher profit margin can have lower prices. If you judge those stores based solely on prices, they're doing a better job at serving consumers. (But the article describes local stores where people pay more for convenience.)
There's an economic theory of Countervailing Power, which is basically that big organizations need to be opposed by creating other big organizations. Much like a union can sometimes get better deals for employees than they could individually, large retailers are a way of "collective bargaining" with suppliers to keep their prices down. The little guy can provide better service, but they don't have that advantage.
They usual solution is for smaller grocery chains to become bigger via mergers.
(Countervailing power doesn't always work. It seems to work for groceries, but not for health care?)
Countervailing power works best in situations where there are truly more choices and more time to select between them. A new car is a great example of where it works, and health care is a great example of how it doesn't.
This is why I proposed the government getting into the grocery business; with the size of these grocery conglomerates, who else is big enough to be a countervailing influence?
It depends on where you live. Around here, off the top of my head, there are: Walmart, Target, Cosco, Safeway, Lucky's, Trader Joes, and several Asian and Hispanic groceries. I think blocking the biggest mergers would be good enough to keep competition going? A government grocery would be redundant.
It's the places without competition that are an issue.
But even in this area where we live, there are significant food deserts. All that competition, and there are still areas where the corner convenience store exists with no competition at all. Talking about the diversity of brands in a metropolitan area obscures the actual competitive landscape, which needs to be tracked at a much more granular scale.
Not sure which places you're talking about, but I think it depends on transportation. If you have a car, I'm not sure there are food deserts in the bay area?
Maybe "food desert" really means poor transportation options, so people can't get to competing grocery stores?
Yes, food deserts are defined as low-income census tracts that are more than one mile from a supermarket in urban or suburban areas and more than 10 miles from a supermarket in rural areas. Lower rates of vehicle ownership and weaker public transportation systems do have a lot to do with it. Tying back into the larger point, the grocery stores that are most accessible to the people in food deserts have those people over a barrel. Even with a diversity of options across the broader cityscape, if you don't own a car every additional mile is a significant hardship.
This data is a few years old now, but here's what the Bay Area food desert map looks like, with half mile and 1 mile versions.
It seems like a pretty rough approximation, considering that it doesn't take into account public transportation at all. For example, you could have a bus stop right in front of your building that takes you directly to a grocery store, but it doesn't count.
Also, ten miles is not very far in rural areas if the roads are good. (Really far on foot though - that seems like a car-centric definition.)
Getting a more detailed picture would probably be quite a project - maybe Google could do it using their transportation routing data? Or using Open Street Maps? So I don't blame them for doing it that way; I'm just saying that sometimes the map is not the territory.
Conversely, smash up the big grocers into regional chains the way we did Ma Bell. Give them less power.
We can see in hindsight that while Walmart was able to lower prices, the primary effect of doing so was destroying countless small businesses, suppressing wages, and lowering quality of goods.
Or failing that useful powercheck, pass a simple law that shops can only negotiate prices with suppliers as a class, such that the lowest price is automatically available to everyone.
You gotta decide which problem you care about more: grocery prices or small business. Because, if you choose small business, they need higher prices to survive, which is bad for their customers.
Although, in many cases small businesses work because they can go upscale, catering to richer customers. There are a lot of people with disposable income, who will pay more without really feeling it if they like the service.
Or maybe subsidies, like we do with agriculture.
It's not an either-or situation though. You eliminate the ability for large players to gain competitive advantage from bullying suppliers. While they can probably still compete with slimmer margins because of the increased volume, they won't be able to also leverage the purchasing power to extract that value from suppliers instead of customers.
There was a time when family-owned single-location grocers was the norm... and the groceries basically cost the same as they do now adjusted for inflation. That tells me that the supposed benefits of scale to the consumer were mostly a lie to instead pad the margins of the store owners.
As they do now at Aldi or Walmart or Hy-Vee or as they do now at the small town IGA or small town Dollar General? (The one with produce and meat)
Because those prices are very different. And the food quality is too.
In aggregate according to whatever metric the Feds use.
My point is that the introduction of megacorps being able to strongarm suppliers hurts more than it helps.
Honestly I think no small part of the problem is that industry is allowed to operate with too many secrets. Half of the arguements put forth by the free market types presume rational actors with conplete information to make informed decisions.
But that aggregate is using those large-supplier-negotiated prices currently. I can't afford to make a local grocer my primary shop. I can walk there for milk if we're out at dinner time but the prices remain significantly higher.
I'm not convinced that suppliers, especially with transport costs, would sell for cheaper without large consolidated orders (especially ones that have their deliveries shipped to large warehouses and handle local distribution themselves.)
I agree that secrecy doesn't help but I don't think it'd change much in the math
If there were no large buyers with the pull to get better deals, suppliers could set much higher prices, and consumers would have no choice but to pay them.
Then stores can switch suppliers? Or customers not buy those goods? Again, this is a relatively new phenomena. Before antitrust was gutted by Reagan, supplier negotiations weren't nearly as big a deal. And gorceries wern't disproportionally more expensive back then, which disproves that the supplier negotiation is actually benefiting customers.
Here's a great post from 2006 discussing this far more eloquently than I can.
It seems like you’re assuming some kind of golden age of perfect competition in the hazy past when things were different. They were different in some ways of course. However, the idea with countervailing power is that because suppliers have become big businesses and can collude to keep prices higher, you need collective bargaining (via large retailers) to get good deals from them. This isn’t a new theory - it’s from American Capitalism by John Kenneth Gailbraith in 1952. Concerns about big business being anti-competitive go way back.
The post you link to gives a good example of that, where Walmart was able to convince Coca Cola to drop an artificial sweetener. That’s what a big retailer can do. Otherwise, who would have stopped Coca Cola? Your small grocery store isn’t in a position to do that. They’re not going to negotiate with Kraft. (Furthermore, grocery stores banding together to negotiate collectively with suppliers is legally dubious. It would be an example of illegal collusion. Unless, of course, there’s a merger.)
I’m not sure Gailbraith was writing about groceries and I don’t know enough about the grocery business (past and present) to do more than share my general impressions, which are fairly limited. But I don’t think you’ve proven anything, and we aren’t going to settle this using this kinds of very broad historical arguments.
Regional chains can still hold a near-monopoly in a given region. It's a good step, but doesn't necessarily fix the price for the consumer. I do like the idea of standardized prices across the board; prices would still vary some, given shipping costs, but it would at least even out costs within a given region. But even then, if a larger player can buy up all of a given producer's stock it doesn't matter if the price is the same across the board.
It's true, but their power will at least be diminished somewhat, and will be more tangible long term if we can prevent them from katamariing themselves back together after.
Absolutely. Maintaining competition is vital. The challenge is that anti-trust action has to be maintained indefinitely or they will merge back together. It's a hard thing to maintain over decades.
Disclaimer: I plan on voting for Harris no matter what.
My opinion is that convicted felon Trump completely ignored this issue.
I also feel that the Biden administration completely ignored the issue of consumer prices until very late in his administration.
Mirror: https://archive.is/Z3CtP
Any thoughts on what language Buche is pronounced BOO-ey?