By Lindsay Owens
If you’ve been slammed lately by higher prices on everything from groceries to rental cars and gas prices, you’re probably wondering what on earth is behind these skyrocketing costs.
Corporations are quick to blame this new reality on the pandemic, but another major culprit is hiding in plain sight: their own profiteering.
Four times a year, corporations are required by law to update their investors on how they’re doing in terms of sales and profits. These are called “earnings reports,” and the companies will usually hold calls with the investors to walk them through the latest report.
My organization, Groundwork Collaborative, recently got our hands on the transcripts from hundreds of these earnings calls. And you won’t believe what CEOs are boasting about.
Knowing that the current inflation frenzy is a convenient scapegoat, these companies are charging customers even more to pad their profit margins. They are just admitting it — they’re openly bragging to investors about how well it’s working.
“I think we’ve done a great job with our pricing,” boasted the CFO of Hormel, a maker of popular grocery brands. “I think it’s been very effective.” As prices went up, the company improved its operating income by 19 percent in the first quarter of 2022 compared to 2021.
Constellation Brands, the parent company of popular beers Modelo and Corona, is also engaging in bald-faced profiteering. On its January call, Constellation’s CFO admitted that its consumer base “skews a bit more Hispanic” and the company wants to “take as much as [we] can” from them.
And now, the conflict in Ukraine is providing yet another opportunity for oil and gas companies to pad their bottom lines. “It’s tragic what’s going on in Eastern Europe,” said one oil executive in late February. “But if anything, these high prices, the volatility, drive even more energy security and long-term contracting.”
This pandemic profiteering is taking a massive toll on consumers, workers, and small businesses.
Low-income Americans are pinching pennies to feed their families and pay their bills. And while mega-companies can use their market power to raise prices and generate record profits, small businesses and independent retailers are struggling to keep their doors open.
The appalling price gouging and monopolistic behavior we’re monitoring comes on top of decades of disinvestment in our workers and supply chain, excessive corporate power, and financial markets maximizing short-term profits. This broken system left us wholly unprepared to accommodate increases in demand.
But make no mistake: next time you experience sticker shock in the checkout line, it’s a safe bet that corporate executives and shareholders are reaping the rewards.
People are catching on: A new poll from Data for Progress and Groundwork finds that 63 percent of voters believe that “large corporations are taking advantage of the pandemic to raise prices unfairly on consumers and increase profits.”
Policy makers are taking notice, too. The New York Attorney General’s office just announced new price gouging rules, paving the way for other states to follow suit.
And days after President Biden promised action on pandemic price gouging, congressional oversight panels opened investigations into the three major ocean shipping alliances. These outfits control about 80 percent of seaborne cargo and have seen their profits increase seven-fold from 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 people across the country from pandemic profiteering.
Without competition and robust regulation to keep them in check, big corporations have gotten away with using the pandemic to push up prices and fatten their profit margins — and if they aren’t reined in, high prices could be here to stay.
Lindsay Owens, PhD, is the Executive Director of Groundwork Collaborative.
Mark says
Saying it doesn’t make it true. A couple of snippets is not proof of your accusations. Let’s see some hard numbers with some full context. Psst, the company’s job is to make a profit. If they are breaking the law then hammer them. Joe “the buck doesn’t stop here” Biden policies have a role in all this too. Along with many other factors.
Mark says
Nope Mark your off. Corporations will use whatever double-speak they can to hide the fact of price gouging to bolster shareholders interest and investment. I literally sat through those meetings at my workplace and every year we had a session to come up with ideas on reasons to up the price of all our products. Even though the cost to produce the items didn’t go up or down we always had a price increase from 2001 to 2015 when the company was bought out and dissolved. Just yesterday I bought an item that I buy constantly and the price had doubled over night. This product is made in the U.S.A and there is no shortage of it, simple price gouging.
Jim says
Quite a different response during WW2. Instead of gouging the country to make record profits (while collecting govt. subsidies no less) companies shut down operations and starting contributing to the war effort. Ford went from producing 3M cars in 1941 to 139 cars in 1942. Alcoa started producing planes. Shipyards started churning out planes, battleships and aircraft carriers. Everyone pulled together and pitched in.
Nowadays, we have conservatives that cheer on the record breaking profits and stock buybacks all the while cheering on and praising the enemy as genius. Shameful.
Frederick says
You can thank Joe Biden and his do nothing administration for run away inflation. He said it himself. No fracking, no drilling… blah blah blah.
Mark says
Show me some facts please. Show me where production costs stayed the same. Show some full context quotes that state they are gouging. “Reasons” may not be legitimate in your mind but they could actually be legitimate to an accountant or CEO. If they are gouging then they are breaking the law and should be prosecuted. Oil isn’t entirely made in the USA. If there isn’t a shortage then why is USA oil not available to fill our needs? I’m not talking about in the ground. Companies may not want to deal with unstable policies or suck oil out of the ground when profit margins are not worth the expense or transport takes up to much cost and liabilities. I don’t say you are off, just lack of proof. I doubt proof can be given in this short article or in these short responses.
Mark says
Didn’t know we were at war right now. Where do you see conservatives cheering on record profits? I think most conservatives are trying to figure out how to survive this temporary inflation.
Alonzo says
Good job Joe. Unemployment down, games prices down, covid cases down. You are doing a good job. We need to get your approval rating up. We will get there. Joe Biden ysll better all about your good accomplishments. The Repubs will tell about your failures.
Sherry says
We are experiencing the terrible down side of “Capitalism”. . . just follow the money! Billionaires NOT paying income taxes (LOOPHOLES)! Professional athletes and coaches making hundreds of millions. . . also, avoiding taxes! Republicans cutting taxes for Billionaires. . . still waiting for that BS “trickle down”! Record profits OVER human beings!
@ Marks. . . again, could one of you please change your handle so we can follow your train of thought. To the Mark that wants hard evidence of price gouging. Please looking up the definition of “PROFIT”. . . “Net Profit” takes into account ALL the costs involved. GEEZ!
David Sandbeck says
We don’t buy oil from Russia. We don’t refine oil from Russia. After crude prices drop, the prices at the pump don’t respond like they do when the price of crude goes up. Companies who boosted record profits last year, are increasing prices. Why, greed! Using inflation as a a scapegoat actually causing the inflation. When prices of domestically produced products go up faster than the cost increase of a Big Mac, there is defiantly gouging going on. Companies that rely on imported goods have had significant cost increases due to the price gouging of shippers and shipping containers, this is facilitated by artificial scarcity and monopoly abuse. Again Total greed, when shippers profits more in the last two years then the did in a decade! You have to be deliberately avoiding the reality that corporations are outing themselves as the primary cause of the rapid inflation. https://www.whitehouse.gov/briefing-room/statements-releases/2022/02/28/fact-sheet-lowering-prices-and-leveling-the-playing-field-in-ocean-shipping/ Another example, one of more than we can fathom here in my home state of Minnesota is Hormel foods. I company I own stock in. Openly boast about increasing prices, though the cost of production bases on their financials did not increase by 7%. https://www.fool.com/earnings/call-transcripts/2021/12/09/hormel-foods-corporation-hrl-q4-2021-earnings-call/?source=iedfolrf0000001 Facts, Examples, and References.
Mark says
Did anyone notice the reduction in gas prices? Gouging running amuck.
Jim says
“Inflation is a goldmine for us” – Senator “little richard” Scott
Klatu says
Jim watches far too much hyperbolic partisan media…clearly.