A closer look at grocery inflation

While I think that inquiries on food prices by the FTC can be warranted at times, I also know that the root causes of inflation have always been centered around those with the power to print money. And there’s only one place in our country where that takes place, in Washington D.C., a place where no one will ever assume this responsibility.

Further, if giving the FTC the current benefit of the doubt, where were they in the first part of ’24, all of ’23 or ’22 in addressing inflation? The very constituents that they claim to be looking out for here should be asking the same.

This is not to say that the supply-chain issues that plagued the world during and after the COVID-19 pandemic did not contribute. They did. However, when the Federal Reserve and policymakers put more money into the economy, through deficit-financed government spending, there becomes more money for an unchanged amount of goods and services, and the artificially induced imbalance eventually shows up via inflation. 

Moreover, in the retail world, wages to keep and hire store-level employees shot up during the pandemic, which resulted in rising labor costs (which always affects prices.) The good news for store-level associates is that when inflation subsides, their wages are not indexed down, thereby maintaining the new higher rate of pay—a good thing.

What most consumers don’t know about the grocery segment of retail is that, most commonly, the net margins for grocers run at only 2-3%. You’ll also have a hard time finding a grocery retailer that is not tremendously giving in numerous ways to the communities that they serve. And while grocery retailers often take the brunt of the blame, it must be noted that they simply reflect higher cost burdens placed on them throughout the channel—raw material providers, manufacturers, cost of transport, labor, etc.

Worth noting related to inflation numbers is that the Consumer Price Index, which measures inflation, does not include in its measurement food or energy—very convenient for our policymakers and bureaucrats on both sides. To be sure, the true inflationary numbers would startle the public and over the history of humankind have led to mass uprisings of populations.

Finally, the way inflation has been historically mishandled in our capital reminds me of the saying,“If you don’t deal with the primary problem, you’ll get secondary problems. And if you just focus on the secondary problems, you won’t solve the primary problem. In fact, you’ll likely make things worse.” 

Jose Tamez is managing partner at Austin-Michael, an executive search and outsourced contract recruiting services firm in the retail and wholesale channels of grocery.