The Sneaky Reason Your Grocery Bill Keeps Going Up

Americans have been dealing with increasing grocery bills for years now. In fact, in the last two years (2022-2024), Americans have spent more of their income on food than they have since 1991. For comparison, in 1991 consumers spent 11.4% of their disposable income on food, compared to 2022 when consumers spent 11.3%, according to data from the U.S. Department of Agriculture. Despite the fact that inflation has finally cooled down enough to convince the Fed (or, rather, this specific interest-rate focused Fed committee) to begin lowering interest rates, consumers might not experience the relief they're hoping for when it comes to food prices. The bad news? It doesn't look like food prices will come down anytime soon, or even at all. Steve Cahillane, chief executive of Kellanova, explained to The Wall Street Journal, "If you look historically after periods of inflation, there's really no period you could point to where [food] prices go back down. They tend to be sticky."

However, while inflation, shrinkflation, and even greedflation tend to take the most blame for increased grocery prices, a lesser known culprit is also contributing to the problem in a significant way. Supply chain issues are still a significant factor in how food prices are being determined. While prices might stay higher than most consumers would like, there is still a lot to know about where, exactly, the increase in food prices is coming from. One culprit in particular? Grocery distributors.

It takes a lot of planning, logistics, and manpower to get groceries to your local store. From farmers and suppliers to distributors and transportation, your food is touched by many different hands across multiple steps to get to the aisle. All of these before-market steps and procedures can (and do) directly contribute to the ultimate price of said product. In fact, this is where a surprising amount of the current hike in grocery prices is actually coming from. Food and grocery distributors, which are an essential part of the supply chain that gets products into stores, have been increasing their fees.

Grocery distributors function as middlemen, buying food products directly from the farmers and food makers that make the products and then storing, selling, and shipping those products to grocery stores and supermarkets who purchase them. However, in recent years the fees and charges associated with this distribution have been on the rise. Even worse, these distributors have been getting more vague with the reasons behind their added fees. According to a report from the Wall Street Journal, food makers have been charged fees for everything from the shelf space fees charged by actual grocery stores to late fees to alleged shipping issue fees to spoilage potential fees. Plus, it's important to realize that any fees charged by the actual grocery stores and supermarkets generally incur an additional fee charged by these distributors in order to "process" those original fees.

As distributors increase fees, food producers face necessary price increases just to be able to keep operating. However, even new innovations or product concepts that could ultimately help a food producer's brand and profitability could end up leading to more fees. Distributors can not only charge for debuting new flavors of products but also for deciding to run special promotions on products. Plus, these distributors can not only charge for over-ordering products (and then being unable to sell them before their expiration date) but can also charge for not providing enough product (to combat the potential for expired goods, which Americans lose money on every year). All of this is to say that it's almost impossible for food producers to avoid the onslaught of additional fees when it comes to getting their food to consumers. This, in turn, means that prices will continue to rise.

While it can be easy to entirely blame grocery distributors for the spike in grocery prices (food prices have increased by 25% since 2019, according to the Consumer Price Index, it's worth noting that grocery chains and supermarket corporations are the ones wielding the most power in this situation, with most grocery distributors operating on slim margins. Meanwhile, most of the major food manufacturers in the U.S. have experienced profits at or even above 2019 levels. Plus, the increase in tactics like shrinkflation further help food corporations' profits while hurting consumers' wallets.