US Food Companies Raising Prices Under Inflation Pretext See Sharp Profit Surge

[Image source=Reuters Yonhap News]

[Asia Economy New York=Special Correspondent Joselgina] Reports have emerged that major U.S. food companies and restaurant chains, which have raised product prices this year citing soaring inflation, are engaging in so-called 'profit feasts.' It is pointed out that excessive price hikes are effectively inflating corporate profits.

According to the New York Times (NYT) on the 1st (local time), major U.S. food-related companies such as PepsiCo and Coca-Cola recorded profit increases far exceeding the price hikes of their products in the third quarter. After raising prices of beverages and chips by 17% compared to the same period last year, PepsiCo's third-quarter profits surged by 20%. Coca-Cola also posted profits 14% higher than a year ago, buoyed by price increases.

Restaurant prices are also becoming increasingly expensive. Mexican restaurant chain Chipotle announced it would raise food prices by 15% compared to last year by the end of the year, and its third-quarter profits increased by a remarkable 26% year-on-year.

This is cited as a representative case showing how quickly food companies and restaurant chains are passing inflation on to consumers. Companies have decided on product price increases considering soaring labor, raw materials, packaging, and transportation costs. However, amid growing concerns about an economic recession, the NYT pointed out that some companies continue to raise prices even though inflation-related costs have already been offset. The NYT reported the atmosphere, saying, "Criticism is pouring in that this is not to cover inflation costs but to inflate profits."

Kyle Herrig, head of the civic group 'Accountable US,' said, "Recent earnings reports only reinforced the view that companies did not need to raise prices so much," adding, "companies have inflated costs and used inflation, the pandemic, and supply chain disruptions as excuses to extract money from consumers," he criticized.

According to the U.S. Bureau of Labor Statistics, grocery prices in households have risen 13% over the past year. By item, cereal and bread products surged 16.2%, and dairy products rose 15.9%. During the same period, dining-out prices also increased by 8.5%.

In particular, the NYT reported that even executives of food companies were surprised that consumers accepted the price hikes so well. James Quincey, CEO of Coca-Cola, mentioned in a previous earnings conference call that despite economic difficulties, customers continue to purchase their products.

However, the newspaper added that as inflation prolongs and the U.S. Federal Reserve (Fed) continues high-intensity tightening, signs of change are also being observed, with consumers, especially low-income and retired groups, reducing spending or seeking cheaper alternatives.

This content was produced with the assistance of AI translation services.