“Greed inflation” of large corporations: How overpriced food is

International food giants are apparently taking advantage of high inflation to raise excessive prices. This now seems to be over, as retail expert Rüschen explains. However, consumers cannot hope for prices to fall.

Since the outbreak of the war in Ukraine, food prices in Germany have risen by almost 30 percent – even more than consumer prices overall. Some of the price jumps for food cannot be convincingly justified, but are probably exaggerated. Although this cannot be proven, trade expert Stephan Rüschen estimates that five percentage points of the price increase since the start of the war was inappropriate, as he calculated in an interview with ntv.de. After all, these disproportionate price increases – called “greed inflation” – should end immediately, predicts the professor of food retail at the Baden-Württemberg Cooperative State University.

The price difference between branded products and so-called private labels, i.e. supermarkets’ own brands, must not become too large. “Otherwise no one will buy them anymore,” explains Rüschen. “People can afford less.” As a result of the generally high inflation, the purchasing power of customers has fallen, so that private labels have already gained massively compared to branded products. Today, for example, more customers choose the discounter’s own brand pesto for 1.69 euros instead of Barilla for around 3.59 euros. “Greed inflation has come to an end in the market economy,” says Rüschen.

Private labels have also become significantly more expensive in the past two years. “This shows that some of the price increases are justified,” explains the expert. However, in his opinion, large international food manufacturers took advantage of the overall rising prices to increase their margins in Germany through excessive price increases. Since German customers buy food very price-consciously, it was previously not possible to earn as much in this country as in other countries.

High prices will remain

Which prices manufacturers can impose depends on their respective market power. Unilever, Mars and Co endure it when German retailers temporarily remove their products from their range to protest against the price demands of international manufacturers. According to Rüschen, smaller German companies, such as the Berchtesgadener Land dairy or Seeberger, were unable to impose excessive prices on retailers.

Retailers themselves also had to increase prices due to increased energy, logistics and personnel costs, in addition to increased product prices. Here too, Rüschen estimates the share of overall inflation since the start of the war to be five percentage points. And prices will continue to rise, even if the inflation rate has now slowed significantly. The decline in the inflation rate is due to the base effects: after the start of the war, prices had already risen so drastically that they are now no longer rising much in comparison. Inflation rates reflect price increases compared to the same period last year.

“Even if the manufacturers have scope to lower their prices again, they won’t do so,” Rüschen is certain. “It will remain at the high price level.” If retailers could buy cheaper again, they would no longer be willing to demand higher prices from manufacturers later. “Trade negotiates hard.”

Personal inflation can be reduced

A year ago, the price war between retailers and producers had reached a quasi-historical level: 17 companies no longer supplied Germany’s largest food retailer, Edeka. Things have now calmed down, even if Kellogg’s products are still missing from Rewe shelves. “But I suspect that the price wars will flare up again in the next round of negotiations,” says Rüschen. “Because the development of energy and personnel costs is open.”

But consumers are not at the mercy of high prices. “You should pay attention to the prices and compare them,” advises the retail expert. “In this way, personal inflation can be reduced significantly.”