Victor Mijangos walks with his dog along the shore in Imperial Beach. However, don’t let the leisurely morning walk fool you. He says the strong wind pushing him around is more in line with the turbulent financial year he’s had due to inflation.
“You have less buying power. It’s been kind of frustrating. It does give you a sense of, maybe, financial insecurity,” Mijangos said as the strong wind continued to sway him back and forth.
The small business owner specifically pointed to higher grocery prices as a growing drain on his monthly budget.
“We just strategize to see what we could do around it to keep our head above water,” Mijango said.
The Bureau of Labor Statistics says food prices at the grocery store were 12% higher this September than they were a year ago.
“In addition to the Avian Flu outbreak, there’s been bad weather that’s been causing droughts,” said Alan Gin, Associate Professor of Economics at the University of San Diego. “There’ve been floods, there’s been freezes, things like that, and that’s caused the price of food to rise sharply.”
That means grocery stores are paying more and passing along those costs to consumers. But we’re also seeing grocery stores posting some big profits.
U.S. & World
Kroger, which operates Food 4 Less and Ralphs, reported $732 million in net income in the second quarter of this year, up 43% from the same time in 2021.
Albertsons, which includes Safeway and Vons, reported $342 million, up more than 14% from 2021.
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The much smaller Sprouts Farmers Markets reported more than $150 million, up around 4% from last year.
“Part of the market is that corporations are going to try to maximize their profits. And so, in a sense, they are greedy that they are trying to make as much money as possible and return that money to their shareholders,” said Gin.
He added that these price increases might not happen if there was more competition but we live in a world of consolidation.
“There’s a proposed merger between Kroger and Albertsons, which will reduce competition even more than in the supermarket industry,” said Gin. “And so there’s some worry there that that would contribute to keeping prices at these high levels.”
Kroger has said it actually plans to reduce prices under the merger.
It’s not just grocery stores – fast food restaurants are also posting some large profits as well.
Both Chipotle and McDonald’s reported higher-than-expected earnings. Chipotle has raised prices 13% over the past year, while its profits jumped more than 11% compared to last year.
McDonald’s menu prices are also up, and so are its profits in the United States.
But what about wages? Gin says, for the most part, companies aren’t paying their workers more, so that’s not a driver of inflation.
“Their labor costs are not going up as rapidly as prices. So the other factors are impacting their prices and that’s actually translating into profits for companies,” Gin said.
And how about oil companies? We’ve all been paying higher gas prices and oil companies are also posting some big numbers.
Looking at three of the largest oil companies, all of them saw their profits jump this year.
BP saw an $8.2 billion profit in the third quarter of 2022. Shell said it made nearly $9.5 billion in profit during that same time. ExxonMobil said it made nearly $20 billion.
Gin says that’s because oil companies sell both oil and gas, and both of these commodities are worth a lot of money right now.
“They're making money on the higher prices that they get for the oil. And then, they also then make higher money in terms of the gasoline that they sell,” said Gin.
We reached out to all the companies we’ve named in this report and asked them to explain their profits, as many people struggle to pay their bills. None responded to our requests.
But what about wages? Could they catch up to inflation?
“I think there’s gonna be a continued discrepancy, even though the labor market right now is really tight,” said Gin.
Meanwhile, Mijangos says he understands companies need to look out for their bottom line. He has his own business after all. However, he wishes there was more of a balance where it’s not only the consumer absorbing the higher costs brought on by inflation.
“While they’re recording profits, the bill is for us to pay right? So the people that are in control have the upper hand,” said Mijangos as he wrapped up his walk and went home to start his work day.
