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In 2021, the White House undertook a review of supply chains throughout the country, from energy to defense, healthcare to agriculture. The Federal Trade Commission (FTC) use the opportunity to examine the grocery supply chain and how consumers and businesses were impacted. The study reviewed the practices and responses of nine grocery companies – three retailers, three wholesalers, and three producers, and used public data on industry costs and revenues. The results of the study were released on March 21.
FTC Chair Lina M. Khan said, “The FTC’s report examining U.S. grocery supply chains finds that dominant firms used this moment to come out ahead at the expense of their competitors and the communities they serve.”
Breaking down the impact of supply chain disruptions during the pandemic
The pandemic was a stress test to the economy. Every industry was impacted in some fashion. Not only were some items hard to obtain, but prices also went up. In many communities, workers were in short supply. Consumers are still feeling the negative effects of the pandemic. The Commission’s report highlights these key findings:
- Smaller grocery retailers faced higher difficulties when compared to their larger counterparts. Larger companies were able to manage their product supply better than smaller ones, sometimes by putting pressure on suppliers, which gave these larger firms a competitive edge.
- Grocery retailer profits rose and remain elevated. Profits in 2023 rose by 7% over total costs. Some doubt that the rising prices of groceries are the result of rising costs to the store.
- Manufacturer promotional spending decreased. Many stores could not rely on “loss-leaders” to drive traffic to the store. This impacted many stores who relied on promotions instead of stores that consistently kept prices low.
The report states, “These elevated profit levels warrant further inquiry by the Commission and policymakers. The Commission made the conclusion, “As supply chains normalize, some of these symptoms may subside, but the underlying issues remain.” Further study may be warranted to understand the impact of supply chain disruptions and how to mitigate the negative effects should another disruption occur.
