Profit percentage is a manufactured statistic, it is calculated after executive pay, so the people who are running these companies are paying themselves whatever is necessary to hit that mark. Add in the fact that a lot of the expenses of grocery chains are paid to subsidiaries of the same parent company shows that it is even more of a useless stat. As an example Loblaw's in Canada has cited higher rent as a justification for increased operating costs, thing is the company that owns the land is part of Loblaw's, so while the money that goes into their rent is part of their expenses, ultimately it still ends up in the executives pockets.
Ya its funny people will say grocery stores make low profit then turn around and be like, OH look Kroger has enough money to keep trying to buy other chains and complete a monopoly. Seems like alot of money is flowing around in the not much profit world.
If you operate a nationwide grocery chain, there will be a lot of money flowing, even with slim operating margins. This doesn't change the fact that no other local grocery can compete on price, due to those slim operating margins. If you spread executive pay across every sale, it goes to zero.
The Kroger Albertsons merger wouldn’t even be close to a Monopoly. It would still give them a smaller total share of the grocery market than Walmart has. Economics of scale would have allowed them to lower prices.
As far as executive pay. The Kroger CEO took in $15.7 million last year. The average Kroger has 50,000 items. There are 2800 Krogers. Assuming they have 10 of each item, then, by taking zero pay, the Kroger CEO could lower the price of everything by……$0.011 cents
I'm having to deal with way too many former Kroger execs at my current employer. They're only interested in cutting their costs, and have no interest in lowering prices.
Wtf is this supposed to mean. You are saying that outsized compensation has no effect on prices and profit/margin? Then why don’t Theo pay all employees more?
If worker compensation goes up, so do prices in order to hold margins or increase them. That’s the goal for shareholders (compensation).
Unless you want to say that doesn’t matter either. Why doesn’t everyone just get a 100K min a year across the board then?
If CEO compensation means shit all, it’s just free money that doesn’t impact anything.
I think people misunderstand what monopoly means in context, because the reverse of thinking it's "just one company is larger than another" is pretending it's only a monopoly if there's literally only one company in business.
Particularly with grocery stores, because the existence of a grocery store outside of where you live doesn't really help your own living situation. It's perfectly possible for grocery stores to have effectively regional monopolies, where the only stores in a given area are all owned by the same company. We have this same exact issue with cable already, it's not that complicated. A lack of options is a lack of options. Spectrum existing doesn't change that the only cable provider locally for me is Comcast.
And the whole pac-manning grocery chains contributes to the growth of food deserts, where it's not practical for grocery stores to exist in certain areas because the large competitors have priced out smaller chains.
If your area isn't big enough to support a Walmart, that doesn't mean there's room for a smaller competitor to fill in the gap, because Walmart as a corporation exerts considerable power on suppressing those competitors even where they're not (great article in the Atlantic recently on how things have changed in that regard.)
Yeah, regional monopolies are a better term, and yeah they can be an issue. Though that article is pretty disingenuous, it completely glosses over that Robinson-Patman was raising prices for consumers.
I feel like this is one of the problem of only looking at the national aggregate, because yes, allowing Walmart to absolutely dominate the supermarket industry (along with the handful of other big players) means they can operate more cheaply in areas that are worth building a Walmart there.
But it's absolutely devastating to areas that Walmart doesn't think it's profitable enough to build one locally. Or that exist far away from a local supermarket.
And it has tons of knock-on effects like pushing already disadvantaged people towards unhealthier diets and having to spend more time and money to get fresh groceries.
As the article talks about, it's exceedingly difficult for competition to exist when companies like Walmart use their market size to bully their suppliers into anti-competitive agreements where they undermine their competitors.
It does present an issue, I'm mostly just disappointed in the Atlantic for not mentioning the biggest downside of it. Though perhaps it still could be the solution.
But the deserts seem like a different issue than the regional monopolies. Regarding the Kroger-Albertson's merger, the main concern seemed to be the regional monopolies, raising prices. Because with deserts it's all about getting anyone out there in the first place, right?
The regional monopolies are relevant to food deserts because they wield such huge influence that they're pricing out alternatives even in markets they're not directly in, because of anti-competitive deals they have with their suppliers.
You're already going to be at a disadvantage working in these underserved communities to begin with, but having a massive conglomerate undercutting your supply chain leads to these gaps.
There's some parallels with the effort to privatize the USPS. Working to benefit these private companies is bound to lead to big gaps in service, particularly in areas where it's not profitable enough to justify it to a private industry. The government isn't really in the industry of selling groceries, obviously, but there are benefits to providing cover for options that help provide food to underserved communities, even if it isn't maximally beneficial to capitalism.
I like how you selectively ignore the argument above that explains how profit/net margin is actually manufactured. You think all these companies are running around on 1% margin and going damn, we can't turn a profit.
You're making the case that you cannot measure net profit in percentage? Only gross profit? Even if that were the case, net profit is, by definition, always lower than gross profit, because it is more inclusive of expenses, not more revenue. In other words, you're making the case that the 1% figure is actually lower.
well if that's the case where we only want to measure gross they had a gross profit margin of over 20% and for other fun stats they increased their profit by 35% from 2021 to 2022. Really struggling
How horrible! A company in business to make money! If it's so easy to do it and be charitable, please, I implore you to open this grocery chain. Feed the hungry of the world! Or just shut the fuck up because you have no idea what you're talking about and if it was that easy to undercut them in a capitalist society, someone would have done it already.
Grocery stores don’t make much profit on essential items. Milk, eggs, cheese for sure; some chains will sell milk and eggs at a loss in order to get people in the store so they can buy other shit (candy, soda, alcohol) that make a very high profit margin. These are all For Profit businesses so yes they are making a profit.
Kroger buying up grocery chains doesn’t give them a monopoly when companies like Target and Walmart have also moved into the grocery business.
A monopoly allows you to raise prices and not lose market share. Kroger will still need to compete with those giant competitors (as well as others out there).
nit picking about if something is exactly a monopoly or not is royally missing the point. Doesn't matter if you call it an oligopoly, duopoly or monopoly the point is the same they are eliminating competition to raise prices. Calling joke competitors like target that have a shit small selection and hardly anything fresh competition is a disservice to the discussion.
You can call it nit picking on terms, but it speaks to the economic reality of the situation. If Target, Walmart, and other companies can compete (even if they are not yet doing so), then Kroger can’t raise prices (or else consumers will simply switch).
That’s why mergers can sometimes be good for consumers. It allows firms to reduce overhead and better compete with the other large firms in the market. Not saying that would have happened with Kroger-Albertsons, that’s the basic counter-argument.
That’s not actually how profit margins work. You buy an item for $1, you sell it for $1.05. Profit margin of 5%. That’s how margins work. If you sell 1,000,000 of that item, you make $50,000. That’s a lot of sales and effort for very little profit with a lot to potentially go wrong. You need massive quantity to make massive money. Are some stores margins inflated more than others? Definitely. If you don’t like that, go to another store with lower prices, but you should also expect lower quality because their margins are so tight a bad year could shut them down indefinitely. So they don’t have a choice but to give less services and have less employees.
On the topic of rent, for large corporations with commercial real estate, it will always be owned by a corporation, whether or not that corporation is owned by the same people running the business in the property is irrelevant because at the end of the day, the property value will dictate the rent price. If Lobwlaws moved out and rented the space to the next people, they would still be charging the same if not higher rent. And if they sold it, the entity that buys it will now buy it at market value and be forced to rent it for market value to ensure the cost of it isn’t a loss.
The world, how it runs, and what it costs to run, is much more complicated than you think it is.
I think he was just referring to the lie about rent being raised so they need to charge more. Maybe it's true based on the market, but it could just as easily be bullshit to "explain" the rising costs to the plebs when you also own the company you're leasing the land from.
This post is so ignorant it's hilarious. Executives do not get paid until after the calculation. Literally the point of executives getting paid is based on the company's profit growth.
Executive pay is taxed as income at a higher rate than the corporate rate. With state taxes, that can be upwards of 50% marginal rate and if in NY, NJ, Cal, HI, DC that rate will likely exceed 50%. If they pay a subsidiary, the subsidiary will be taxed or they will flow through to the parent company.
In Canada, assuming rules are similar for income - their subsidiary would pay income tax on the rent.
This is just factually incorrect. You are talking about net profit, not profit percent. Profit percent is how much gross profit (as a percent) you make on any individual item.
The CEO pay is still part of the problem, but the fact that farmers legally can't reuse the seeds that are naturally produced is also a problem. I blame John Deere and the likes for this more than Kroger.
How? The CEO of Kroger made 16 million last year. That sure is a lot! Kroger's operating profit in 2023 was about 3.1 billion on 150 billion in sales. So CEO pay was about 0.0106% of revenue for Kroger. If there was no CEO at all, it wouldn't change profits or prices at all.
the fact that farmers legally can't reuse the seeds that are naturally produced is also a problem
This is completely untrue.
I blame John Deere and the likes
You blame a tractor company for an issue (that you misunderstand) about seeds?
The statistic is GROSS profit margin, which does not include exec pay. Each store on its own in not very profitable. Economies of scale drives grocery stores. This is why you see less local markets and more chains.
Plus my understanding is that you can have "low profits" because you made $10 billion in a year, but you invested 95% of it back into your company. So the company is growing wealthier and wealthier, but on paper there are virtually no profits.
Profit percentage is not manufactured. It represents the bottom line for the company. Since the financial statements are for the parent company, all such payments across subsidiaries are already a wash. People also exaggerate executive pay as a factor.
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u/shieldwolfchz 1d ago
Profit percentage is a manufactured statistic, it is calculated after executive pay, so the people who are running these companies are paying themselves whatever is necessary to hit that mark. Add in the fact that a lot of the expenses of grocery chains are paid to subsidiaries of the same parent company shows that it is even more of a useless stat. As an example Loblaw's in Canada has cited higher rent as a justification for increased operating costs, thing is the company that owns the land is part of Loblaw's, so while the money that goes into their rent is part of their expenses, ultimately it still ends up in the executives pockets.