REVEALED: The mysterious fees inflating your grocery costs
As grocery costs skyrocket amid unprecedented inflation, consumers have lost track of what exactly is driving up the prices of necessities.
But the main source of product price increases is something consumers don’t regularly consider: sneaky excessive fees that catch food manufacturers off guard.
George Milton, who runs a hot sauce company in Austin, Texas, told the Wall Street Journal: ‘Is that a price increase or are costs going up for distributors, retailers or farmers? I have no idea. Nobody does that.’
Food manufacturers have been forced to raise their prices to keep up with the fees distributors and supermarkets are hitting them with.
Distribution companies are responsible for the intermediate phase from manufacturer to supermarket.
The higher food costs that are staggering American consumers can be attributed to the fees food manufacturers receive from supermarkets and distributors
Total food costs increased by 2.4 percent between September 2023 and September 2024
Some popular companies that sell products to stores across the country include KeHe Distributors, C&S and United Natural Foods.
Milton said relying on distributors can be expensive and they can be cryptic about their costs.
He is often confronted with compensation, making it unclear what he is paid, if at all.
“That’s a very difficult way to run a business,” Milton told the Wall Street Journal. “But what’s the alternative, that I ship it from one place to another?”
The outlet reported that food manufacturers could face reimbursements from supermarkets if distributors deliver their products late or in partial shipments.
Distributors can also pass along fees for shelf space and promotion from grocers to food manufacturers.
Companies may even charge additional fees to process these fees.
Food manufacturers have been forced to raise their prices to keep up with the costs and fees they are being hit by distributors and supermarkets
If a distributor buys too much from a maker and the product spoils, he may charge a spoilage fee. But the same applies if a food supplier reduces an order to prevent spoilage.
“All of this is the Wild West,” Jack Acree, who has worked with several food brands, told the Wall Street Journal. “There are very few rules.”
These high expenses have baffled food producers as much as consumers, and many of them have been unaffected no choice but to increase the cost of their products.
Kyle Koehler, CEO of granola maker Wildway, said he was forced to raise the price of his product because of distribution costs.
“Once brands start realizing how much is being shaved off the top, there isn’t much choice,” he said. “It has to go out of business or raise my price to weather the storm.”
The owner of spice maker My Family Seasonings, Christine Quinn, said she almost went bankrupt because her distributor paid her 40 percent more than she charged for her products.
Food distributors are also struggling to make profits in the current state of the economy
As a result, she had to increase the cost of her herbs. Four ounces of a prime rib seasoning mix used to sell for $4.99. Now customers have to spend $6.99, the Wall Street Journal reported.
Based on the latter Consumer Price Index Reporttotal food costs increased by 2.4 percent between September 2023 and September 2024.
From August to September, prices increased by 0.2 percent. These figures take into account both purchases in the supermarket and purchases in restaurants.
Deb Conklin, CEO of food distributor KeHE, said three-quarters of the fees are passed on to supermarkets.
But even the distributors who contributed to these price spikes said they are not making significant profits.
“It’s almost impossible to make money as a distributor,” James Curley, who has worked for both manufacturers and distributors, told the Wall Street Journal. “It’s just the nature of the business.”
Despite handing out a lot of fees, distributors have a hard time turning a profit due to the lack of ability to contain operating costs, which are rising like everything else.
Donald Trump has cited inflation and food costs as a key part of his campaign
Conklin told the Wall Street Journal: “There are costs associated with doing business. We don’t charge for charging.’
Rising costs have been a hot topic for both Donald Trump and Kamala Harris ahead of Tuesday’s election.
One of Trump’s campaign promises is that, if elected president, he will reduce the daily costs that Americans incur.
At a rally in August, Trump spoke about inflation and rising costs in general.
“People go to the grocery store and get less than half a deal,” he said.
Kamala Harris has pledged to reduce food costs by banning corporate price metering
Harris has proposed ambitious plans to lower Americans’ food costs while distinguishing himself from the Joe Biden administration.
She called for a federal ban on corporate price-gauging during the first 100 days of her presidency, if elected.
The proposal would also crack down on mergers of major food companies, which could allow companies to raise food prices and undermine competition, the Harris campaign said.