Consumers are wising up to 'greedflation' as food companies keep prices high
Most consumers think food brands are using inflation "as an excuse to hike prices," a survey says.
The idea, known as "greedflation," says that companies are improving their profit margins.
PepsiCo, Nestlé, Conagra, and other food companies say they are trying to cover their costs.
Inflation is cooling off for many products. But grocery prices have remained stubbornly high.
Shoppers think "greedflation" is to blame, according to a new survey.
Eighty percent of shoppers said that food companies are "using inflation as an excuse to hike prices," according to a poll conducted by consumer research company Attest. The poll was conducted in February among 2,000 working-age consumers in the US, Attest said.
Grocery prices in the US rose 8.5% in March over 2022, according to federal data. Prices for most other products and services, such as new cars, clothing, and gasoline, either rose more slowly or fell over the same time period. While costs of raw materials, labor, and shipping have continued to be high, many food companies have reported leaps in profit at the same time.
Shoppers have become skeptical that the price hikes are just about companies covering higher costs, Jeremy King, CEO and Founder of Attest, told Insider. Many have noticed that food companies' profits have been increasing, too, a sign to them that some of the higher prices are about something other than covering production costs.
"It's fair for consumers to ask: 'If you're making record profits, and visibly increasing prices above average inflation, then surely it's consumers who are the losers, and you're taking advantage of us?'" King said.
Recent earnings from food companies suggest that many have raised prices higher than inflation.
Conagra, the company that makes Slim Jim beef sticks and Swiss Miss hot chocolate mix, reported earnings per share that were 54% higher than a year ago in results earlier this month. Sales growth at the company was "primarily driven by inflation-justified price increases," CEO Sean Connolly said during a call with analysts to discuss the earnings.
Conagra has tried to improve its profit margins in recent quarters after a rocky few years, he said. Consumers stocked up on snacks and packaged foods early in the pandemic, but sales tapered off as society reopened and people returned to their normal eating habits. "Conagra is one of the only companies in our peer set whose gross margins are essentially on par with pre-pandemic levels," Connolly said.
A spokesperson for Conagra did not immediately respond to Insider's request for comment.
This week, PepsiCo's earnings beat analysts' expectations. Price increases drove the higher-than-expected results: Revenue rose 14% despite the fact that the volume of beverages that it sold only rose 1% — and sales volumes of snacks, a category that includes Doritos and Sun Chips, fell 3%. PepsiCo did not immediately respond to a request for comment.
Swiss food and consumer goods giant Nestlé raised prices 8.2% in 2022, the company said in earnings on Tuesday. The company continued to raise prices during the first quarter of 2023, and more increases will be necessary this year, CEO Mark Schneider confirmed on an earnings call.
"The significant amount of pricing in Q1 reflects the input cost inflation we all witnessed over the past two years," he said. Nestlé did not immediately respond to Insider's request for comment.
Schneider said in February that Nestlé had taken a "massive" hit to its gross margins and would need to raise prices to recover them, CNBC reported.
Companies' explanations that they are just covering their costs aren't resonating with consumers, King told Insider.
"What matters here is what consumers feel," he said. "From our research, we can see that consumers, rightly or wrongly, feel that prices are increasing faster than is necessary, and we term that 'greedflation'."
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