Food Company Monopolies

Back in December, the organization Food & Water Watch published a report entitled Grocery Goliaths: How Food Monopolies Impact Consumers. As this is an issue that’s near and dear to my heart, I immediately downloaded it for a little light weekend reading (ha, ha). Since you took the pop quiz already, you probably have some sense of how consolidation impacts the American food system. What I’ll do here is give you a few of the highlights of the F&WW report, so that you can get a better idea of why this should matter to you as a consumer.

Cost

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This is perhaps the most obvious – and enraging – issue for most consumers. Let’s take a look at some statistics and impacts. In 2012, Americans spent $603 billion on groceries. This is obviously a lucrative market for producers, and it has been getting more lucrative in recent years. Between 2010 and 2012, food prices rose twice as fast as wages and inflation. Why did this occur? When big companies buy up smaller competitors, they increase their market share and decrease competition. As a result, they have a big incentive to raise prices. The F&WW report states that the “link between grocery consolidation and retail grocery prices has been studied extensively, and the vast majority of studies have found that food prices rise when retail concentration increases.” A research economist with the USDA agrees.

Lower wages all the way down the food chain

The trouble with having one or two major suppliers for a given food item (such as, say, tortilla chips) is that less of the money filters down the chain. Consolidation means that farmers receive a shrinking percentage of consumers’ food dollars. Small suppliers, too, suffer. Retailers often charge companies a “slotting fee” for having prime shelf space at a supermarket. While large companies can afford to pay these considerable fees, the Federal Trade Commission has concluded that small suppliers are being “squeezed off the shelves.” In fact, larger producers pay the fees not just in an effort to promote their products, but to keep others’ out.

Predatory advertising

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Larger food companies have more money to spend on advertising. There is overwhelming evidence that food marketing to children has a huge influence on their food preferences (Questions? Ask me! I wrote my thesis about this). The other thing that large food companies do with their advertising is market specifically to low-income populations. The report states that food companies like Unilever, ConAgra, and Hormel track advertising (and sales) according to the “paycheck cycle.” One industry publication encouraged supermarkets to ensure that processed foods be “available and merchandised at the right time of the month” for food stamp (SNAP) recipients. If you feel like this doesn’t apply to you because you don’t fall into the low-income category, think again. You’re a taxpayer, and the health of the nation impacts your wallet.

Consumer choice

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Do you feel overwhelmed when you walk down the cereal aisle? Me too. But what, exactly, are you choosing between? Food & Water Watch reports that “many firms sell multiple brands of the same product, which leads consumers to believe that they are choosing among competitors when they are actually just choosing among products made by the same firm that may have been made at the same factory.” If you took yesterday’s quiz, you saw this in the yogurt question. Even many organic/health-food brands are purchased by large companies, but continue to be marketed separately and even have their own websites, making it difficult for the consumer to really know what the parent company is.

Did the food monopoly matter to you before? Does it matter to you now? I’d love to hear your thoughts!

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One thought on “Food Company Monopolies

  1. This is one aspect of an ongoing, general consolidation of economic and political power, particularly in the United States. (Coincidentally, there’s a thoughtful post today on GigaOM, a popular “tech” blog, regarding some other aspects of the situation: http://bit.ly/1bi8mvu.) On the negative side, this means appropriate legal restraints on the oligopolization of the food industry are unlikely in the near future, as most of the U.S. government is well controlled by moneyed interests, including food oligopolists. On the positive side, it means raising public awareness of the oligopolization of the food industry and its costs may both reinforce and be reinforced by public concern about other aspects of the situation. Ultimately, the matter needs to be integrated into a broad platform of demands for a government that typically serves the whole populace rather than favoring rich people and corporations at everyone else’s expense.

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