If you’ve been criticized recently by higher prices on everything from groceries to rental cars and gas prices, you’re probably wondering what’s behind these skyrocketing costs.
Companies are quick to blame this new reality on the pandemic, but another big culprit lurks in plain sight: their own profit.
Four times a year, companies are required by law to inform their investors of their results in terms of sales and profits. These are called “earnings reports” and companies usually set up calls with investors to walk them through the latest report.
My organization, Groundwork Collaborative, recently got hold of the transcripts of hundreds of these revenue calls. And you won’t believe what CEOs brag about.
Knowing that the current inflationary frenzy is a convenient scapegoat, these companies are charging their customers even more to increase their profit margins. They just admit it – they openly brag to investors about how well it works.
“I think we’ve done a great job with our pricing,” boasted the chief financial officer of Hormel, a maker of popular grocery brands. “I think it was very effective.” With rising prices, the company improved its operating profit by 19% in the first quarter of 2022 compared to 2021.
Constellation Brands, the parent company of popular Modelo and Corona beers, also indulges in outrageous profits. During his January call, Constellation’s CFO admitted that its consumer base “is a bit more Hispanic” and that the company wants to “take as much as possible [we] can’ of them.
And now the conflict in Ukraine presents a new opportunity for oil and gas companies to improve their bottom line. “It’s tragic what is happening in Eastern Europe,” said a leader in the oil sector at the end of February. “But on the contrary, these high prices, the volatility, lead even more to energy security and long-term contracts.”
This pandemic profitability is wreaking havoc on consumers, workers and small businesses.
Low-income Americans are pinching pennies to feed their families and pay their bills. And while mega-corporations can use their market power to raise prices and generate record profits, smaller companies and independent retailers are struggling to keep their doors open.
The appalling price hikes and monopolistic behavior we watch come on top of decades of disinvestment in our workers and our supply chain, excessive corporate power and financial markets maximizing short-term profits. This failing system has left us totally unprepared to cope with the increase in demand.
But make no mistake: the next time you experience sticker shock in the queue, it’s a safe bet that corporate executives and shareholders will reap the rewards.
People get it: A new poll from Data for Progress and Groundwork finds that 63% of voters think “big business is taking advantage of the pandemic to raise prices unfairly to consumers and boost profits.”
Policy makers are also taking note. The New York Attorney General’s office just announced new rules on price gouging, paving the way for other states to follow suit.
And days after President Biden promised to act on pandemic price spikes, congressional oversight committees opened investigations into the three major shipping alliances. These companies control around 80% of sea freight and have seen their profits increase sevenfold over the previous year.
Finally, a recently introduced bill, the COVID-19 Price Gouging Prevention Act, would help the Federal Trade Commission and state attorneys general protect citizens across the country from pandemic-related profiteering.
Without competition and strong regulations to control them, big companies have managed to use the pandemic to drive up prices and fatten their profit margins – and if left unchecked, high prices could be here to stay.
Lindsay Owens, PhD, is the Executive Director of Groundwork Collaborative. This editorial was distributed by OtherWords.org.