Why are food prices so absurdly high and what could be done to fix this?

Question

Why are food prices so absurdly high and what could be done to fix this?

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Answer 1

So until recently I worked for a publicly traded, internationally owned grocery chain. I’ve gotten asked some version of this question more times than I can remember. Often it’s like “are these prices legit or a people just greedy.”

And the answer is, a little of both. The price increases don’t start at the store level, for sure. The vendors who make the food products are charging more, and they’re doing that, partly, because their supply, labor, etc costs are higher. And it goes back and back until somebody is like “Well you can’t blame us, have you seen gas prices?”

But I mentioned it was partly greed, and it is. So part of being publicly traded is that you have to make projections to share holders. We’re going to make x money and we’re going to do it with y sales, z margin, q labor costs, and so forth. And if you miss those numbers, you’d better have a real good reason, because in our financial system, a company’s number one responsibility is to its shareholders.

So take a gallon of milk. Let’s say it costs a store $2 to buy it, they sell it for $3. That’s a nice healthy margin. But then some cows get sick, gas gets more expensive, and the farm had to pay its farmhands a little more to keep them from jumping to the next farm. Now a gallon of milk costs the store $3. So the store could keep the price at $3, but then they’re not making any money. They could sell it at $4 dollars. That’s still a big jump, but the store would still be making the same $1 profit. Okay, seems fair, right? But guess what, store promised its shareholders it was going to make a certain margin percentage, and to keep that rate, you need to sell that gallon of milk for $4.50.

I’ve literally been in a meeting where someone said “we’re really charging that for a gallon of milk, like seriously??” The people close to ground level get it. And their bosses get it. But the further up the chain you get to someone who is like “we have to maintain our margin or we’re all going to get fired.”