Kroger executive admits company gouged prices above inflation (2024)

A top company leader at Kroger has admitted during an antitrust trial the company gouged prices on select items above inflation levels.

While testifying to a Federal Trade Commission attorney Tuesday, Kroger's Senior Director for Pricing Andy Groff said the grocery giant had raised prices for eggs and milk beyond inflation levels.

"This is not at all surprising," Drew Powers, the founder of Illinois-based Powers Financial Group, told Newsweek. "Companies across multiple industries have been posting record profits since the COVID-19 crisis while consumers have faced the highest inflation in recent history. The math can only point to companies raising prices above the general level of inflation. As the old saying goes, 'Never let a good crisis go to waste.'"

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The questioning came during a court hearing for Kroger's FTC suit after the retail giant announced it would be acquiring top grocery competitor Albertsons.

Groff said Kroger intends to "pass through our inflation to consumers," after an internal email from the executive showed that the price of eggs and milk routinely surpassed what inflation would require for the chain to still make profits.

"On milk and eggs, retail inflation has been significantly higher than cost inflation," Groff said in the internal email to other Kroger executives.

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Newsweek reached out to Kroger for comment via email.

A Kroger spokesperson previously told Bloomberg that Groff's comment was "cherry-picked" and "does not reflect Kroger's decades long business model to lower prices for customers by reducing its margins."

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Not everyone believes that the email comment is reflective of Kroger's price-setting policies or the grocery industry at large.

Economists have long indicated that the grocery sector, which is composed of only a few chains like Kroger and Walmart, was benefiting from supply chain disruptions during the pandemic, allowing the companies to hike prices beyond what was necessary to retain profits.

"Comments like this, despite their honesty, call into question the explanations Americans have been given for the last three years on inflation," Alex Beene, a financial literacy instructor for the University of Tennessee at Martin, told Newsweek.

"Supply chain issues, rising shipping costs, and increased wages certainly played their part in the higher prices we're currently seeing. However, the admission some prices were elevated simply because businesses knew they could doesn't help the case for those arguing price gouging isn't an issue."

The FTC antitrust case alleges that if Kroger successfully acquires Albertsons, consumers will see even higher price hikes due to the reduced competition from the two chains being merged.

Larger Trend?

During the pandemic, food and energy prices drove the overall level of inflation, and many of those same sectors saw companies post record profits, Powers said.

"There is not just one bad apple in this bunch," Powers said, adding that most companies who engage in price gouging receive limited consequences.

"Historically, corporations guilty of price gouging have faced relatively light repercussions when compared to the profits made from the offense. It will be interesting to see if Kroger is hit harder this time around as these allegations have come to light during FTC hearings in their bid to acquire Albertson's," Powers said.

Kevin Thompson, a finance expert and founder and CEO of 9i Capital Group, said Groff's comments highlight a larger trend in the current economic system.

"We've moved away from true capitalism towards an oligarchic structure with less competition and larger players dominating the market," Thompson told Newsweek.

"This shift, driven by a focus on shareholder interest, has diminished consumer choice and competitive dynamics."

Executives tend to be incentivized to maximize shareholder wealth by increasing revenue and reducing costs, Thompson said.

"This pricing strategy was likely implemented to maximize profits," Thompson said. "Other grocers may have taken similar actions, as executive compensation is often tied to stock price performance. Many executives push the boundaries of what's legally permissible to boost returns."

Because customers generally still have choices to shop at other grocers like Walmart, Thompson said Kroger is unlikely to experience any severe consequences from the FTC.

But Michael Ryan, a finance expert and founder of michaelryanmoney.com, said Kroger might have bitten off more than it can chew with its price gouging admission.

"It's like catching a kid with their hand in the cookie jar, and instead of denying it, they proudly announce, 'Yep, I took 'em all,' Ryan told Newsweek. "Kroger's not alone in this game. I'd bet my last dollar that other big players like Walmart and Publix are pulling similar stunts."

Despite the fact that this is likely a larger problem in the grocery sector, Ryan said consumers could react swiftly with their wallets.

"Customers aren't dumb," Ryan said. "I've seen loyal shoppers jump ship as soon as they feel ripped off. Once that trust is gone, it's hard to win them back."