--:-- [Theme music fades out]
--:-- Noel King: Welcome to Today Explained. I'm Noel King.
--:-- Noel King: Groceries are expensive right now. They're much more expensive than they were pre-pandemic. Kellogg's CEO Gary Pilnik was roundly mocked last week for suggesting that everyone just eats cereal for dinner.
--:-- Noel King: Cereal for dinner is something that is probably more on trend now, and we would expect to continue as that consumer is under pressure. Cereal prices are up 28 percent since 2019, Gary. Come on, man.
--:-- Noelle King: Meanwhile, a big grocery chain in Europe is refusing to sell PepsiCo products, accusing the brand of gouging its customers. That's unlikely to happen in the USA. But the 2024 election is barreling towards us. High grocery prices have become political. And President Biden is on the offensive.
--:-- Noelle King: Coming up on Today Explained, ready, set, go. It's supermarket week.
--:-- Noelle King: I might not have money for food or to hang out with my friends, But I always have money for candles. I always have money for candles.
--:-- Noelle King: Support for this show comes from ServiceNow. AI is only as powerful as the platform it's built into, don't you know? That's why it's no surprise that more than 85% of the Fortune 500 use the ServiceNow AI platform.
--:-- Noelle King: Didn't know that. While other platforms duct tape tools together, ServiceNow seamlessly unifies people, data, workflows, and AI, connecting every corner of your business. and with AI agents working together autonomously, anyone in any department can focus on the work that matters most.
--:-- Noelle King: I've never met an AI agent. Learn how ServiceNow puts AI to work for people at servicenow.com.
--:-- Noelle King: Support for this show comes from strawberry.me. Be honest. Are you happy with your job? Or are you stuck in one you've outgrown? Or never wanted in the first place?
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--:-- Noelle King: Are you ready to go shopping? Step inside a very special supermarket. The only supermarket in the world that gives you today explained.
--:-- Noelle King: I'm Noelle King with Wizzy Kim, a senior reporter at Vox who's been covering the rise of grocery prices.
--:-- Wizzy Kim: What did you do? In general, grocery prices have increased about 25 percent since 2019, like before the pandemic. Overall inflation is certainly easing or slowing, if you will.
--:-- Wizzy Kim: But new labor department data shows that the amount being spent on eating has hit a 30 year high. So one 12-ounce can of soda, for example, is about 75% more expensive today than it was before the pandemic.
--:-- Wizzy Kim: But it is still the same size can, right?
--:-- Wizzy Kim: Yeah. Isn't there another thing where we're getting, we're kind of getting less? It's harder to quantify, I guess, how many brands are doing it and for which products. But there certainly have been instances where, let's say, a bottled drink of some sort is a smaller volume but selling for the same price.
--:-- Wizzy Kim: And this is called shrinkflation because you're paying the same amount of money for less product. As an ice cream lover, what makes me the most angry is that ice cream cartons have actually shrunk in size, but not in price.
--:-- Wizzy Kim: I've had enough of what they call shrinkflation. It's a ripoff. Shrinkflation and inflation. What's driving all of this? What's behind it?
--:-- Wizzy Kim: Some of it is genuinely from higher input costs. So that might be things like just the actual base material for our product might be more expensive. Like, I think we all remember when egg prices were super high.
--:-- Wizzy Kim: I just left the belly. Guess how much they charged me for the dozen eggs? $6.99.
--:-- Wizzy Kim: $6.99? For the eggs. Can't even have an egg sandwich! This is ridiculous. I'm done. I'm done.
--:-- Wizzy Kim: And that's because the egg prices going high was due to the avian flu, just because there weren't enough healthy eggs and healthy chickens to go around for a while. And now that that's better, egg prices are down.
--:-- Wizzy Kim: Things like transportation costs, just the supply chain getting tangled up, so things taking longer to arrive somewhere. All of those things did add up to higher prices.
--:-- Wizzy Kim: Y'all, these prices at the fast food establishments blow my mind. $40 to take your kids to eat breakfast at McDonald's.
--:-- Wizzy Kim: You know, now you got Wendy's talking about surge pricing. Now, the only thing you fix to see a surge in is ramen noodles.
--:-- Wizzy Kim: But there is also a part of this that is about companies seeing an opportunity to push prices maybe a little bit higher than they actually need to.
--:-- Wizzy Kim: Major food companies are raking in record profits. ConAgra, which owns Chef Boyardee, Hunt's, and Slim Jim, posting a 56 percent jump in profits last quarter compared to a year ago.
--:-- Wizzy Kim: It's not like we as a consumer know exactly like, oh, the higher input costs are just X amount and anything beyond this is greedy. We don't know to that level of detail. So it's opportunistic as well.
--:-- Wizzy Kim: And as we, the shoppers, get used to paying more, economists warn that grocery prices could stay higher for longer.
--:-- Wizzy Kim: Into all of this madness over grocery bills being too damn high walks Carrefour. Tell us what Carrefour is and what they did.
--:-- Wizzy Kim: Carrefour is a European grocery chain. And they recently started pulling some PepsiCo products off their shelves in at least five countries, citing unacceptable price increases.
--:-- Wizzy Kim: Some people in Europe noted Doritos or Cheetos, chips like that, maybe not being available. Pepsi, Lipton, 7-Up, Lay's, Doritos, Ben & Nuts, or encore Quaker.
--:-- Wizzy Kim: There has been much detailed info on exactly which products are off the shelves, but we do know that certain PepsiCo products are not being stocked as they normally would be.
--:-- Wizzy Kim: Pepsi has hiked prices for seven quarters in a row. And despite reporting a 2.5% slump in sales, the company reported a 14% spike in profits. That's according to data from 2023.
--:-- Wizzy Kim: How did Pepsi respond to this? Well Pepsi said that actually it was their choice to not supply certain care for locations because their negotiations broke down and they couldn agree on terms to sell and buy from each other
--:-- Wizzy Kim: Did Carrefour only target PepsiCo? Carrefour as of now has only taken PepsiCo products off the shelves in this manner, citing unacceptable price increases.
--:-- Wizzy Kim: But last year, they did do a shrinkflation campaign where they would put these little labels next to certain products like Lipton Iced Tea, which is also a PepsiCo product. And note that the volume had gone down of this product, but the prices were the same.
--:-- Wizzy Kim: We consider that there's a lack of honesty towards customers and that the customer can be deceived because the product appears to be exactly identical to the previous products that they used to buy.
--:-- Wizzy Kim: Europe takes a stand is like a familiar theme. And here in the United States, we're dealing with exactly the same thing.
--:-- Wizzy Kim: Have any American grocery stores been like, PepsiCo, it's too much? We won't carry you? Well, so I reached out to the four biggest grocery chains in the U.S., which includes Walmart, Kroger, Costco, and Publix. I believe.
--:-- Wizzy Kim: And none of them got back to me. All of them declined to comment.
--:-- Wizzy Kim: I think the answer is no. It wasn't like, no, we're not going to do that. It's because we want our consumers to have the choice. We're not going to hit that one head on.
--:-- Wizzy Kim: Do we have a sense of why they wouldn't respond to you? I mean, this is a sticky thing. I read about it. People sent me the article. I have friends who are like texting me weekly about their grocery bills. Why would American companies not at least want to talk about it, do you think?
--:-- Wizzy Kim: That's kind of hard to say definitively. You know, who knows what they're thinking, but I have some theories. And I think one of them is that the grocery market is even more dominated by really one company in the U.S., unlike in Europe.
--:-- Wizzy Kim: Where is it written that prices have to go up? Not at Walmart. So Walmart is just overwhelmingly the biggest grocery retailer. Has something like 25, 26 percent of the market.
--:-- Wizzy Kim: Commitment to save you money wherever we can. Rolling up my sleeves, rolling back the price together.
--:-- Wizzy Kim: So Walmart doesn't really need to drag this out into the public. I'm sure to some degree it does want to keep prices reasonable for consumers. It behooves them to do that. But they don't need to be public and aggressive about it.
--:-- Wizzy Kim: They can just do it behind the scenes. They can just say, hey, we would really like you to not raise prices this quarter. And a lot of these food companies will be like, well, it's Walmart. We should try to listen to them.
--:-- Wizzy Kim: Another reason we're seeing such differences across the board is that in France, where Care4 is based, grocery retailers can only set prices or negotiate those prices once a year. In the U.S., that can happen anytime that food companies want to do it.
--:-- Wizzy Kim: And it does pretty much happen anytime they want. So I would say those are the two biggest reasons why we're seeing such a difference across the board.
--:-- Wizzy Kim: And so at the moment, grocery stores are not going to have our backs and tell companies what to do. It wouldn't be the American way, I guess.
--:-- Wizzy Kim: Fair enough. Is there anything, I mean, in your reporting, is there anything you came across about how individual shoppers can ease the cost of groceries at all?
--:-- Wizzy Kim: I think it's really, really hard. Because again, you could, and I'm sure many people already do this, go to a value grocery chain, which Walmart is, and just find the cheapest price as possible, whether it's buying the store brand or just cutting back on something, whatever it is.
--:-- Wizzy Kim: And Walmart does often offer the cheapest prices for groceries. But, you know, the issue with that is long term. That also reinforces what I was just talking about, where Walmart has the biggest share in the market and command the biggest price setting power.
--:-- Wizzy Kim: And that can just have this ripple effect on what prices other retailers can offer. Because Walmart can basically demand lower prices from suppliers because they're so big. And other grocery chains don't have that power.
--:-- Wizzy Kim: So you're going to go to Walmart. And that's just going to leave us fewer choices.
--:-- Wizzy Kim: Coming up, these United States are unlikely to ban Pepsi. What they can do.
--:-- Wizzy Kim: Support for Today Explained comes from Built Rewards. These days, it seems like everybody has a rewards program. You swipe your card and you get one cent on the hundred dollars. But with your rent, frequently, you just pay month after month. You never get anything from it other than that roof over your head.
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--:-- Wizzy Kim: Your home isn't just where you sleep, it's your community, and Bilt wants you to go out and do things in the community. You can eat at your favorite local restaurants, then earn more points. You can get VIP treatment at certain fitness studios. You can enjoy exclusive experiences just for Bilt members every month.
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--:-- Wizzy Kim: Why shop at Burlington? Maybe it's the deals that are new each time you drop by. Maybe it's the brand names you'll be shocked Burlington has in store. Or maybe it's the quality of the items, the amazing selection, and the newest trends.
--:-- Wizzy Kim: If you like to save but also like to stay in style, Burlington is your answer. And the question you'll be asking yourself is, why go anywhere else? Burlington. Deals. Brands. Wow.
--:-- Wizzy Kim: Support for Today Explained comes from Upwork. If you run a business, you know that scaling your business requires the right expertise at the right time.
--:-- Wizzy Kim: I sometimes wonder how many of you are running businesses out there. I would love to know. Please email me, noelle at king.com.
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--:-- Noelle King: Attention, call shoppers. There is a clearing as today explained. So my name is Elizabeth Pancotti, and I am a strategic advisor at the Groundwork Collaborative, a progressive think tank here in D.C.
--:-- Elizabeth Pancotti: Earlier in the show, we were talking to Vox's Wizzy Kim about how a grocery chain in France is fighting high prices by saying we're just not going to carry PepsiCo products. American grocery stores will not do the same.
--:-- Elizabeth Pancotti: We talked about how it doesn't feel like the American way, but I'm really curious whether it is an option. Could the government make food retailers lower prices?
--:-- Elizabeth Pancotti: Technically, no. right now as it exists under current law, we have no authority for the government to come in and kind of establish price controls specifically.
--:-- Elizabeth Pancotti: The example you gave in France is a little bit different just because retailers negotiate in kind of a regulated way with food manufacturers. We don't have that system here.
--:-- Elizabeth Pancotti: So while the government can't necessarily control the prices that retailers put on stickers, we can give more money to low-income people to deal with those higher prices. And so the Biden administration has done this kind of incredible and pretty underrated thing for about 40 million Americans who are on SNAP, which is food stamps or the Supplemental Nutrition Assistance Program.
--:-- Elizabeth Pancotti: For those people, we actually can help them weather the storm of higher prices. What did the Biden administration do exactly?
--:-- Elizabeth Pancotti: So over the last three years, the Biden administration has actually increased the average benefit for those families on SNAP by more than double how much grocery prices have increased.
--:-- Elizabeth Pancotti: The new maximum SNAP benefit for one person will be $291. For a family of four, they'll get $973. It's sort of incredible.
--:-- Elizabeth Pancotti: And I think like both people receiving those benefits and people in general just like aren't super aware of the really targeted and progressive food assistance policies that the administration has done.
--:-- Elizabeth Pancotti: What about all the Americans who make too much money to qualify for SNAP, but too little to afford groceries these days?
--:-- Elizabeth Pancotti: So the Biden administration's efforts so far have fallen into one big bucket that I'll call tackling concentration in our grocery and food markets. They've done great work there, but we think there are a couple other things they could do using existing law to bring down food prices.
--:-- Elizabeth Pancotti: Not so much to tackle their growth, but to actually bring the levels down. And so the first is enforcing price discrimination statutes.
--:-- Elizabeth Pancotti: And the second is eliminating junk fees in grocery stores. Price discrimination is like personalized pricing. I'm charging some people lower prices than others for the same thing.
--:-- Elizabeth Pancotti: The big effort, you say, is tackling concentration. What's the Biden administration doing there?
--:-- Elizabeth Pancotti: So just last week, we found out that the Federal Trade Commission is suing to block the $25 billion proposed merger between grocery giants Kroger and Albertsons.
--:-- Elizabeth Pancotti: This deal would give Kroger and Albertsons control of more than 10 percent of the grocery market domestically. Both companies argue that this merger would lower prices for consumers and create good paying union jobs.
--:-- Elizabeth Pancotti: This had been kind of rumored in the news that the FTC was considering it. This deal was announced about a year and a half ago. And some state attorneys general have already sued to sort of say that this merger would make grocery markets less competitive in certain regions and certain states.
--:-- Elizabeth Pancotti: But now the Federal Trade Commission has sued to block the merger entirely across the entire country.
--:-- Elizabeth Pancotti: The FTC argued the merger of Kroger and Albertsons would be bad for competition, lowering worker wages and driving up the cost of food.
--:-- Elizabeth Pancotti: And then there is the meat industry. So for beef, pork, and poultry, there are about six players that control between half and 75% of the market.
--:-- Elizabeth Pancotti: But this wasn't always the case. The industry has become highly consolidated over the last 30 to 40 years. And that has kind of two big effects.
--:-- Elizabeth Pancotti: One, ranchers make a lot less money. So they're getting about 30 cents on the dollar for the meat that they produce, where it used to be nearly double that.
--:-- Elizabeth Pancotti: And then consumers are paying a lot more at the grocery store because of this consolidation. Capitalism without competition isn't capitalism. It's exploitation. That's what we're seeing in meat and poultry.
--:-- Elizabeth Pancotti: So the Biden administration has proposed rulemaking as part of a big plan to tackle fairness, competition and resiliency in meat supply chains.
--:-- Elizabeth Pancotti: These regulations, unsurprisingly, were severely weakened by the Trump administration. And so in October of 2022, the Department of Agriculture proposed regulations to increase competition and integrity in those markets.
--:-- Elizabeth Pancotti: Trenching competition is good for all of us. Farmers and ranchers deserve a fair shake. American families facing high prices at grocery stores deserve a fair price to put food on the table.
--:-- Elizabeth Pancotti: The Biden administration has proposed those rules, but they have not yet finalized them, meaning that they are not the law of the land currently.
--:-- Elizabeth Pancotti: And so we really urge the administration to finalize those rules and put them into place to ensure that the law really protects ranchers and consumers here.
--:-- Elizabeth Pancotti: When you have a consolidated meat market, meaning there's a couple players, it means that small supply shocks, like most folks have heard about avian flu and its effect on chicken prices and egg prices. They have a much bigger price effect because there are so few players.
--:-- Elizabeth Pancotti: And so there's no competition in the industry for them to say, OK, we've been affected by avian flu but we won pass that full price on the consumers to be competitive
--:-- Elizabeth Pancotti: The pricing power of these few players in the industry is really outsized when these supply shocks happen
--:-- Elizabeth Pancotti: And so the administration has not only, you know, proposed regulations that would prohibit price discrimination and deceptive practices, but they've also invested over a billion dollars in diversifying our meat supply chain so that there is more competition among suppliers.
--:-- Elizabeth Pancotti: One other thing we think that the Biden administration can do that they haven't done yet is tackle price discrimination.
--:-- Elizabeth Pancotti: An interesting thing about big box retailers like your Walmarts and your Kroger is that they go to Frito-Lay and they say, OK, we'd like to buy, you know, 100 bags of Doritos for every store this week.
--:-- Elizabeth Pancotti: Conversely, when a small grocer goes to Frito-Lay and says, I want to buy five bags of Doritos, you can imagine that the price of those Doritos will be really different.
--:-- Elizabeth Pancotti: There's actually a law on the books about how companies can charge different prices depending on the size of their buyer. And so it's much cheaper to manufacture 100 bags of Doritos for every single Walmart store in America, right?
--:-- Elizabeth Pancotti: Like you've got an economy of scale there that brings down Frito-Lay's price. you probably really want Walmart to buy a lot of Doritos from you if you're Frito-Lay.
--:-- Elizabeth Pancotti: And so you might give them a discount above and beyond how much cheaper it is for you to make that outsized number of bags of Doritos.
--:-- Elizabeth Pancotti: That's illegal under the Robinson-Patman Act. Oh.
--:-- Elizabeth Pancotti: And so that law is on the books, but not really enforced. It's been used like three times over the past 40 years.
--:-- Elizabeth Pancotti: And so we think that the federal government could enforce this law that's on the books and in doing so, make sure that the smaller grocers get the really good low prices that Walmart and Kroger are able to negotiate.
--:-- Elizabeth Pancotti: Anything else that the government could do to ensure that those Americans that are struggling at the grocery store struggle less?
--:-- Elizabeth Pancotti: There's this one sort of niche thing that most folks probably don't know about. And so I think the best example of this is on the ice cream aisle.
--:-- Elizabeth Pancotti: And you can only pack so many freezers into the aisle at Trader Joe's or Costco or Walmart, right? Like you just can't have a hundred aisles of freezer space.
--:-- Elizabeth Pancotti: As a result, let's say your Ben & Jerry's and Breyers, you have to compete for the amount of freezer space that you get at a grocery store.
--:-- Elizabeth Pancotti: And so the way that grocers allocate this freezer space for, you know, your favorite two types of ice cream flavors, is they essentially charge a fee that they give the space to the highest bidder.
--:-- Elizabeth Pancotti: So if Ben & Jerry's has a new flavor they want to launch, or if they really want a ton of pints of Cherry Garcia in a Walmart in Washington, D.C., they can just buy more of that shelf space.
--:-- Elizabeth Pancotti: That means that Breyers has to take some pints out of the freezer space. And so this means that what Ben & Jerry's does is instead of just paying, you know, Kroger or Walmart a bunch of money and then taking that as the cost of business, they pass that on to consumers.
--:-- Elizabeth Pancotti: So your pint of ice cream might be $4, but then once they have to pay this fee called a slotting fee, they might charge you another dollar to cover the cost of that fee.
--:-- Elizabeth Pancotti: And if we're trying to bring down grocery prices using the authorities, the limited authorities that the federal government has, we think they should start with banning slotting fees.
--:-- Elizabeth Pancotti: President Joe Biden famously loves ice cream. I came down because I heard there was chocolate chip ice cream. By the way, I have a whole refrigerator full upstairs. If he if he fixed that, he could do like a really authentic ad. I think so.
--:-- Elizabeth Pancotti: I mean, we have I think the best parts of the president are when he's at the ice cream shop eating chocolate chip ice cream. And so we should just have him do that for the next nine months until the election.
--:-- Elizabeth Pancotti: The thing is, I'm still getting angry texts and phone calls from my friends and family, I kid you not, saying such and such is so expensive. I just spent $75 at the grocery store.
--:-- Elizabeth Pancotti: I myself see it every time I go grocery shopping. It doesn't seem to be working right now. Am I reading that wrong?
--:-- Elizabeth Pancotti: I think that's right. But I think really the culprit here is corporate greed.
--:-- Elizabeth Pancotti: We have found that all of these companies, at first they were bragging about how big their margins were getting and how they were raising prices for consumers. And now they're not so much raising prices. Like grocery prices really have slowed in terms of growth.
--:-- Elizabeth Pancotti: They only rose by about 1.3% last year, lower than regular inflation. So like we've seen the tides turn. But prices aren't coming down, even as costs for people making our food are coming down significantly.
--:-- Elizabeth Pancotti: And that is a problem with America.
--:-- Elizabeth Pancotti: Yeah, I think that's just the problem with unfettered capitalism, right? I mean, we've talked about how in France, the retailers and the government have a lot more power to regulate this kind of thing.
--:-- Elizabeth Pancotti: So one recent example is that Justin Trudeau, the prime minister of Canada, told all the grocery stores in Canada that they had to come up with a plan to lower prices for Canadians at the grocery store.
--:-- Elizabeth Pancotti: And if they didn't, if their plan wasn't satisfactory, he would raise their corporate tax rate.
--:-- Elizabeth Pancotti: And I think you have a problem in America where if Joe Biden called up the CEO of Walmart and said, you have to lower your prices or I'm going to hike your corporate tax rate, the lobbyists of Walmart would probably laugh in his face and say, no, you won't.
--:-- Elizabeth Pancotti: Friend of the show, capitalism.
--:-- Noelle King: Elizabeth Pancotti, thank you so much for taking the time for us. We really appreciate it.
--:-- Elizabeth Pancotti: Of course. This is so fun. Thanks for having me.
