And the CEO isn't wrong - customers are used to gas prices flailing all over the place, but they notice food price changes, and so things "build up" over time and when the dam finally breaks, it breaks hard.

Arizona Iced Tea started at 99 cents in 1997 - today that should be $1.83 but it's still 99 cents. Same with Costco's hot dog and chicken (though they've done some noticeable changes on the hot dog).

When the dam breaks, it's not going to go up 10%, it's going to skyrocket to try to make up for lost time.

Those are not good examples. One is sugar water with extremely high profit margins, and the other is likely sold as a loss leader or at most, at cost.

Food prices have been changing for a long time, but only if you pay attention to quantity and ingredients. With gas prices, the unit quantity or ingredient cannot change, so the change is obvious. Same with things like milk and eggs and vegetables though, which do change often.

With processed food, the seller has much more ability to maneuver around having to increase price.

Yeah - my point was that once prices start going up noticeably, all the other processed food manufacturers will increase their prices, also (often with a "return to what the original size was" along with it).

> One is sugar water with extremely high profit margins

I assure you, as someone in a position to know the numbers, that sugary beverages have low margins. It is very expensive to move them around, marketing is expensive, and customers are very price sensitive.

Is this at the retail level? At the producer level, profit margins seem quite decent:

https://www.investopedia.com/ask/answers/071015/what-profit-...

Logically, if the same quantity of Arizona Ice Tea retails for the same price as it did 25 years ago, then someone in the supply chain is or was making huge profit margins, considering the increase in materials and transport costs.

I don’t have any special insight into Arizona.

Adding onto this a little: I was shocked at how volatile some food prices are, and how much some have gone up recently

https://www.fao.org/worldfoodsituation/foodpricesindex/en/

Depending on how you set your endpoints, you can basically come up with any number for inflation you want, from 1.7% to 20+%

I guess this is all well-understood and taken care of under the hood by processed food companies, though, since the Big Mac Index has pretty steadily held to an inflation level near the CPI

The big mac index tracks labor costs as much if not more-so than wholesale food prices.

Price of anything can be reduced to labor, energy, and scarcity as, you move up the supply chain.

It's because the consumer literally has to buy hundreds of things. Tinkering with a penny turns into a dollar real quick.

That's not how it works. It's percentage changes that are significant.

Every thing in my cart increases by a penny. It (the cart, my food) now costs $2 more. Easy math. Change that to percentages and amount increases, of course.

They do play with pennies. I worked in a huge national restaurant chain as a teenager and went through numerous menu updates. They were always flipping nickels and pennies all over the place on the menu. As a kid I thought changing the menu prices by five cents was ridiculous. Apparently, that's how it works in this business with razor thin margins.

There's a reason why corporate profits are at all time highs. they're just pushing any inflation related costs and more directly to consumers and scraping even more profit off the top.

This is actually just not even controversial, completely supported by data.

https://fred.stlouisfed.org/series/CP

I can't believe you're being downvoted

That may be the case, but that should allow a new competitor to come in and offer lower priced goods.

Yeah, starting a new local grocer or even national grocery chain is pretty easy, right? Why don't you lead the charge.

Because I have no incentive to do so? I could, certainly, but until this deal proves rotten there is no impetus for action.

If they were at all time highs the stock market would not be done so much.

The stock market hasn't been connected to reality for years. Companies which produce nothing and are deep in debt have high stock value purely on basis of speculation. Most companies that report layoffs, tough times etc also report record levels of profit because it's not enough to be profitable, you have to go well above and beyond profit. You have to squeeze out everything even at the cost of short term stability.

Which companies that produce nothing and are deep in debt have shown growth in market cap?

From what I can tell, the biggest gains have been at companies that have very strong profits and prospects due to high barriers of entry to their business, and the companies with steady but small profits do okay, and the companies not earning any profits have shown losses.

Why would you not expect nominal profits to be at all time highs if the purchasing power of the currency goes down?

Nominal profits would have to increase for profit margins (which are already low single digits for grocery stores) to be maintained.

You’re being downvoted and all you’ve done is state fact!

Are _margins_ increasing (I don’t know) - because that would be the required condition to conclude nefariousness.

Hilarious what gets downvoted on HN.

Inflation since Jan 2020 is 15% according to BLS.

If corp profits go up 15% the real profit increase is 0%

People are upset that wages aren't keeping up with inflation, but profits are. The rest is bad expression of that idea.

Some businesses’ profits are keeping up with inflation, and some are not. Grocery stores sell relatively inelastic goods at already low profit margins, so there is not much room to not keep up with inflation. The other option for them would be going out of business.

> Why would you not expect nominal profits to be at all time highs if the purchasing power of the currency goes down?

Purchasing power doesn't magically decrease, it's a function of increasing prices.

Think about for a little. If a companies input costs have increased by 10% their profit will decrease right, maybe not by 10% but it will decrease. So if they increase their prices they can get back to their previous profit level. Instead they have increased prices even more such that their profit is HIGHER than it was before inflation.

QED

There is a term for that, called profit margin. And profit margins have not materially increased.

https://www.macrotrends.net/stocks/charts/KR/kroger/profit-m...

https://www.macrotrends.net/stocks/charts/ACI/albertsons/pro...

Obviously, a 3% profit margin after a year of inflation is going to be nominally higher than a 3% profit margin before the year of inflation.

Hence any whining about nominal increases in profit is innumeracy, or clickbait, especially for businesses that play in the sub 5% profit margin ranges.

How low do people think grocery store profit margins should go? Have they tried successfully operating a business at 3% profit margin?

This would be a cute reply if the data supported your idea. But it doesn't.

https://www.bloomberg.com/news/articles/2022-08-25/us-corpor...

Highest margins since 1950.

Turns out there are businesses that aren't Grocers.