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“The calls tell us that corporations have used inflation, the pandemic and the supply chain challenges as an excuse to exaggerate their own costs and then nickel and penny consumers.”

A woman shopping for groceries in Manhattan on July 13, 2022. Hiroko Masuike / The New York Times

A year ago, a pack of potato chips at a grocery store averaged $ 5.05. This bag costs $ 6.05 these days. The dozen eggs that could be picked up for $ 1.83 now average $ 2.90. A two-liter bottle of soda that cost $ 1.78 will now cost $ 2.17.

Something else is much higher too: corporate profits.

In mid-October, PepsiCo, whose beverage and chip prices rose 17% in the last quarter compared to the previous year, announced that its third-quarter profit had increased by more than 20%. Likewise, Coca-Cola posted a profit 14% higher than the year before, largely due to price increases.

Restaurants are also becoming more and more expensive. Chipotle Mexican Grill, which said prices by the end of the year will be almost 15% higher than a year earlier, posted a profit of $ 257.1 million in the last quarter, almost 26% more than a year earlier.

Over the years, food companies and restaurants have generally raised prices in small, gradual steps, fearing that big increases will scare consumers and send them looking for cheaper options. However, over the past year, as wages and salaries have risen and the cost of the raw materials used to make treats such as cookies, chips, sodas and their packaging materials has risen, food companies and restaurants have begun to pass these expenses on to customers.

However, with growing fears that the economy may be headed for a recession, some food companies and restaurants continue to push up prices, even after they have covered their own inflation costs. Critics say all moves are aimed at increasing profits, not covering expenses. Coca-Cola, PepsiCo and Chipotle did not respond to requests for comment.

“Recent appeals for wages have only reinforced the known and undesirable motive that corporations do not have to raise prices so high in troubled families,” said Kyle Herrig, president of Accountable.Us, a support organization. “The calls tell us that corporations have used inflation, the pandemic and the supply chain challenges as an excuse to exaggerate their own costs and then nickel and penny consumers.”

Food businesses and restaurants were able to raise prices because most consumers, while annoyed that a trip to the grocery store or a take-away ride cost more than a year ago, were willing to pay. But there are many buyers, including those with lower incomes or fixed-budget retirees, who say that higher prices have changed their routine.

Diane English, 80, a partially retired artist who lives with her partner in Asheville, North Carolina, said she now shopped at cheaper grocery stores like Aldi so she could afford grocery shopping. She also stopped buying some groceries because they are just too expensive.

“I don’t remember the last time we had a steak,” said English. A few weeks ago, she said, she looked at the meat department at The Fresh Market grocery chain and was disheartened by the high prices she found.

“We won’t do it,” she said. – We can not.

Over the past year, the prices of food consumed at home have increased increased by 13%, according to the Bureau of Labor Statistics, and some positions have risen even more. Cereals and bread increased by 16.2% compared to a year ago, followed closely by dairy products, which increased by 15.9%.

In the same period, the cost of eating in restaurants increased by 8.5%.

Even the food directors were surprised by how well the higher food prices were received.

In an interview with investors, Coca-Cola’s CEO James Quincey said customers continued to buy the company’s products despite economic challenges.

“Consumers have remained resilient in the face of these pressures, and we continue to invest in our beloved brands to add value to the marketplace and grow our business,” said Quincey.

https www.nytsyn.com images feed support photos download 28b06d1c 61a7 449f 82f6 c2c7b26b454b 63613ceb52338 scaled
Dinner at a sidewalk cafe in the Little Italy neighborhood of lower Manhattan on Thursday, October 27, 2022 Investors and analysts are wondering when rising prices will start to keep more people away from restaurants. – Amir Hamja / The New York Times

This summer, while talking to fellow Wall Street analysts, Goldman Sachs analyst Jason English noted that food giant Conagra Brands was able to price its products above inflation rates and recovered profit margins.

Sean Connolly, president and CEO of Conagra, said manufacturers noted that inflation had hit their profits early and that maintaining solid earnings was key to developing new products.

“We need healthy margins to be able to develop this innovation and deliver it to our customers in the marketplace,” Connolly said. Conagra did not respond to a request for a comment on this article.

Likewise, investors and analysts are keeping a close watch on Chipotle’s continued price hikes, wondering when it will become too much for customers. In late October, the company announced that its profit margin had increased in the third quarter as it was able to raise the prices it was charging faster than its own costs had increased. The company announced that its prices in the last three months of the year will be almost 15% higher than a year earlier.

“The average starter was around $ 8 nationwide two years ago, and in the last two years they may have made $ 1.50,” said Sharon Zackfia, head of consumer research at William Blair & Co.

She added: “I am intrigued by what happens when goods fall again and how do restaurants offer more value to the consumer without lowering prices? In the long arc of history, most restaurants do not cut prices. ‘

Still, some cracks do appear. Not all companies have increased profits. Profit in McDonald’s, for example, it fell due to how strong the dollar weakened other world currencies. According to data from the research company Information Resources Inc. The high prices of cold cuts, fresh fish and frozen dinners have caused some buyers to stop buying these products.

Darden Restaurants executives told analysts in September that households with annual incomes below $ 50,000 were feeling the general effects of inflation and were less likely to eat at Olive Garden and Cheddar’s. Darden CEO Rick Cardenas said: “We see softness in these consumers, while conversely, we see strength in visitors in higher income households.”

Nicole Blaha, 53, who lives in Scottsdale, Arizona, has started going to Walmart more often to stock up on things like muesli bars and cereals to save money. He also uses an app called Ibotta to get a refund for some purchases. This is one area of ​​her life that has been hit by inflation where she feels she can make significant changes.

“Actually, it’s easier for me to work with the grocery and I’m trying to save some money where I can,” said Blaha. “You can’t argue with the electricity bill.”

In March, consumers began to switch to cheaper brands of stores more and more, Wall Street analysts said in a phone call in August, executives of TreeHouse Foods, a company that produces biscuits, crackers, pickles and beverages for retailers.

TreeHouse CEO Steve Oakland told analysts that “consumers are making changes to reduce their spending, which includes considering the store brands and the value they represent.”

This article originally appeared in New York Times.

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