Grocery Inflation Gets Political

A new survey shows consumers blame government policies the most for high grocery prices, but food suppliers and grocers weren’t far behind.

In the survey of 1,150 U.S. consumers conducted by The Feedback Group, respondents were asked to attribute responsibility for increased food and grocery prices on a five-point scale where five is “highly responsible” and one is “not at all responsible.” Government policies and actions received the highest mean score (3.86), followed by product manufacturers and suppliers (3.75), worldwide political conflicts (3.42), supermarket retailers (3.40), and labor supply shortages (3.23).

Factors viewed as least responsible were climate change factors (2.85) and farmers and growers (2.78).

The survey comes as inflation, particularly escalating food prices, is shaping up as a primary election issue this year. According to a recent Data for Progress survey, 27% of voters identified “the economy, jobs, and inflation” as their top priority when deciding their vote — and among these respondents, 51% cited inflation as their primary concern within this category.

A Yahoo Finance-Ipsos survey from last November found that 67% of respondents cited food costs as their top inflation concern, compared with just 15% for gas and transportation costs and 12% for housing.

The latest consumer price index (CPI) data released April 10 showed that inflation increased a faster-than-expected 3.5% on an annual basis in March, up from a 3.2% increase in February and well above the Federal Reserve’s 2% target.

Food at home prices rose 1.2% in March, reversing a continuous decline in the metric dating back to September 2022, when inflation finally began slowing after hitting a four-decade high. Grocery prices remain up about 25% over the past four years.

The spike in food prices has been largely attributed to food suppliers’ ability to pass through higher costs largely tied to the pandemic. Underlying costs have grown due to glitches in transportation and trucking, labor shortages, raw material and input constraints, in addition to ecological challenges like extreme weather and Avian flu. Russia’s invasion of Ukraine then prompted a spike in commodity prices for wheat, corn, and vegetable oils that are finally settling back down. Record profits from grocers, however, have also been called out.

In recent weeks, President Biden has taken a tougher stance on grocery chains, accusing them of overcharging shoppers and earning excess profits. A Federal Trade Commission report that arrived in March claimed that large grocery store chains exploited product shortages during the pandemic by raising prices significantly more than needed to cover their added costs and continue to reap excessive profits.

In a statement last week after the March inflation report was released, Biden said dealing with inflation “remains my top economic priority” and suggested that grocers could do more to provide relief to shoppers.

“Prices are still too high for housing and groceries, even as prices for key household items like milk and eggs are lower than a year ago. I have a plan to lower costs for housing — by building and renovating more than 2 million homes — and I’m calling on corporations including grocery retailers to use record profits to reduce prices,” Biden said.

In a recent column for Supermarket News, Scott Moses, the head of grocery, pharmacy, and restaurants for the investment bank and financial services company Solomon Partners, said he believes both grocers and the Biden administration are being wrongly accused of sparking inflation.

“While food inflation is finally moderating, it remains a severe challenge for most Americans and its causes should be more clearly — and correctly — understood,” wrote Moses. “There are enough subjects in American politics where some people exaggerate, mislead, and manipulate to try to drive support and votes; let’s keep that out of our grocery market, which is a lifeline to millions of Americans and simply too important to be a political football.”

The Feedback Group’s survey found shoppers continue to wildly overestimate supermarket profit margins. Shoppers indicated they believe their primary store has a net profit of 31%, a slight decrease from the results of the last two years in the survey of 35% (2023) and 33% (2022). According to FMI – The Food Industry Association, “The average net profit for a supermarket has been close to 1% historically (and as high as 3% in 2020).”

When asked on a five-point agreement scale if their primary supermarket is on their side when it comes to inflation and to rate if their store is good at communicating why product prices have risen in the past few years, shoppers in The Feedback Group’s survey gave supermarkets relatively low scores of 3.23 and 3.01, respectively.

“Clearly shoppers believe supermarkets could do more in terms of supporting them when it comes to fighting inflation, as well as communicating why product prices have increased,” said Brian Numainville, a principal at The Feedback Group. “This is especially important in light of the inaccurate profit perception we continue to find in our research.”