Inflation is top of mind for most consumers – and voters. Almost everyone considers inflation bad, and when something bad happens, it’s usually accompanied by an impulse to find something or someone to blame.
Unsurprisingly, corporate America finds itself on the hot seat, and the food industry is occupying the hottest of all. Food is something people have to buy regularly, and because of factors like bad weather and the war in Ukraine, it has risen in price faster than most consumer goods.
That has led to a narrative about “greedflation” – inflation intensified by greedy corporations who raise prices beyond what they need to. In support of this idea, an organization called The Groundwork Collaborative has released a document titled “Corporate Profiteering Findings,” which purports to blow the lid off this situation.
This report consists almost entirely of excerpts from earnings calls, wherein top company executives discuss their companies’ performances and address the inflation issue. Of the 62 companies featured in the report, 10 are food or beverage processors.
The Groundwork Collaborative boldfaces what they consider to be especially damning remarks. At the same time, give them credit for including the full context immediately afterward. Let’s see how that works out in a couple of examples:
Conagra Brands: The boldfaced quote is that Conagra was benefitting from “inflation-driven pricing actions and lower-than-expected elasticities.” The rest of it is: “While our net sales exceeded our expectations, margin pressure in the second quarter was also higher than expected driven by three key factors” (higher costs for ingredients and transportation, and investments in the supply chain).
Hershey Co.: The boldfaced quote is: “Pricing will offset the majority of our inflation.” The rest of it is: “...but it doesn’t fully offset the additional investment that we’re also making to improve the value proposition for employees.”
Tyson Foods: The boldfaced quote is: “We're not asking customers or the consumer ultimately to pay for our inefficiencies. We're asking them to pay for inflation.” The preceding portion is: “Labor costs have been up 20%, cattle costs are up – have been – they're up 22%. Grain has been up 29% this year and freight, I mentioned earlier, is up 32%.”
In other words, companies are motivated (or forced) to raise prices by many factors other than greed. It’s practically inevitable in the current climate.
And what is “greed” in a business context, anyway? The Groundwork Collaborative includes numerous examples of stock buybacks and high compensation for executives, taking it for granted that this is all a bad thing.
I’m not going to go full Gordon Gekko here and argue that “greed is good,” but I will state the obvious: The desire to make as much money as possible is the engine that powers capitalism. Yes, there is the potential for abuse, but market competition takes care of most of that.
For situations that lie beyond the power of the market to correct, there’s always government. But governmental intervention in markets, through price controls or other means, is a crude, blunt instrument that should be wielded only as a last resort. Whether to wield it is one of the toughest decisions facing policymakers; demagoguery about “greed” won’t help.