The U.S. Federal Trade Commission (FTC) probed the country's grocery supply chain to better understand disruptions during the COVID-19 pandemic and the resulting impacts on trade, from producers to consumers.
The FTC found evidence, through publicly available data, that r
etailers enjoyed higher profits amid price inflation. To conduct this study, the FTC issued orders to nine grocery businesses, including Kroger, Walmart, Amazon, and C&S Wholesale Grocers, to provide regulators with details about their operations.
The results showed food and beverage retailer revenues increased to more than 6% over total costs in 2021.
“In the first three-quarters of 2023, retailer profits rose even more, with revenue reaching 7% over total costs,” the report said, adding that the elevated profit levels warrant further inquiry by the commission and policymakers.
"This profit trend casts doubt on assertions that rising prices at the grocery store are simply moving in lockstep with retailers’ own rising costs."
Supplier pressures
The pandemic made clear that supply chain bottlenecks, which can be created or exacerbated by limited competition, can leave markets exposed to major shocks. The report said that those shocks, in turn, can allow major firms to entrench their dominance and further harm competition.
Achieving more diversified supply chains, including through promoting competition, can both limit the severity of supply chain shocks and, in turn, reduce the opportunity for that entrenchment.
The report also indicated that the retail grocery sector has undergone significant consolidation over time, with the top four firms accounting for over 30 percent of the sales in 2019, as compared to around 15 percent in 1990.
Much of the consolidation is attributable to larger, national firms acquiring smaller regional chains.
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