“Producers, not supermarkets, profited most from inflation”

Which companies reaped the biggest profits after the sharp rise in food prices in 2022? According to a new study, that would not be supermarkets, but rather a limited number of powerful food producers.

Lower profits for supermarkets

Farmers, consumers and politicians have recently been pointing the finger at supermarkets in response to the sharp rise in food prices. They were wrong to do so, economist Olivier Malay of the Free University of Brussels ULB. He examined the annual accounts of thousands of companies to find out who benefited from the price increases, and told Belgian newspaper De Standaard that supermarkets did not benefit from high inflation.

His study, published by think tank Minerva, makes one thing quite clear: supermarkets did see their sales rise sharply, but their costs increased even faster. Indeed, suppliers charged higher prices, while energy, transport, rent and labour also became more expensive. As a result, their profits in 2022 were even lower than in previous years.

Market power pays off

The situation is different among Belgian food producers: as many as 46 % of them posted higher profits in 2022. Among the 200 largest companies in the sector, profitability was more than a quarter higher than in the previous four years. Seven manufacturers even saw exceptionally strong increases in profits: potato processor Clarebout Potatoes, for example, posted an operating profit of 167 million euros in 2022, up from an average of 1.3 million in the previous four years. That is an increase of almost 6000%… Agristo and Lutosa, starch producer Tereos, pasta maker Soubry, Tiense Suiker (sugar refinery) and Cargill’s Belgian division also posted sharply higher profits.

How they managed to do so? They have great market power, according to Malay, and are not afraid to use it. In other words: they were easily able to pass on increased commodity prices to their customers, which helped them increase their margins. He points out that the four largest commodity suppliers (ADM, Bunge, Cargill and Dreyfus, also known as the ABCD group) saw their profits double to thirteen billion dollars in two years’ time, thanks in part to speculation. A tax on excess profits in the food sector – along the lines of the energy sector – is therefore not a bad idea, the economist believes.

Evolution of operating profits of large food companies