The latest inflation figures have once again hit record highs, driven by food and energy costs – and corporate greed? The ability of companies to raise prices above their rising costs has even given rise to the term “greed”.
For small businesses like Remedy Organics, a plant-based wellness beverage company in Englewood Cliffs, New Jersey, it’s all about pricing power and who has it. “We are seeing price increases [on our products] across the country from select retailers,” said Henry Kasindorf, CEO of Remedy. Prices for Remedy’s beverage line have risen 10% to more than 25% at some retailers, according to Kasindorf. (A 12-pack of the company’s wellness shakes sold on Remedy’s website costs $64.99.)
Kasindorf, who joined the company a few years later his wife, Cindy Kasindorf, founded it in 2017, says they’ve been surprised by some retailers’ price increases that have taken place over the past couple of years. month. Remedy is monitoring the speed of sales at these retailers to understand the impact of price increases on sales – early indications show that sales are not affected, but Kasindorf admits that “it may be too early for the say”.
Despite its own reluctance to raise prices, Remedy says it is seeing substantial cost increases throughout its production process, from bottles and packaging items to key ingredients. This is partly due to external factors – a key ingredient is derived from sunflowers from the Ukrainian region. The company was able to find other suppliers, but at a higher cost.
Retailers themselves face higher costs. Kasindorf says Remedy is seeing more price increases in California, which he attributes to raising the state’s minimum wage to $15 — other states have also increased their minimum rates. They are also experiencing higher distribution costs as distributors raise wages to address labor shortages and rising fuel costs.
The June consumer price index showed inflation rising 9.1%, the largest gain in 1981. The day before the Bureau of Labor Statistics released this reading, the House Blanche played down the data, noting that it was already “outdated”. “Falling gasoline and food prices over the past few weeks seem to point to a better reading in July.
The concept of greed centers on corporate profits and their excessiveness. A June study by the Roosevelt Institute, a New York-based think tank that focuses on “reducing corporate power,” shows that U.S. corporate margins and profits grew last year at the fastest annual rate. fast since 1955. Annual net profit margins ranged from 5.5% between 1960 and 1980 and averaged 6% during the 2010s, according to the study. But in 2021, margins jumped to 9.5% among the cohort of 3,698 companies examined.
But others dispute the very existence of greed, saying we simply see supply and demand at work. Billions of stimulus dollars pumped into the economy have created a demand shock, while the Russian invasion of Ukraine and other supply chain crises have limited stocks – cars, for example . Greedflation is a misnomer in the eyes of Alan Wink, managing director of capital markets at EisnerAmper LLP, a New York-based accounting firm. He says everyone in the supply chain – from small to large companies – is going through a period of rising costs.
“We’re in a crazy time right now where everyone can raise prices because other competitors are doing the same thing,” Wink says. “There’s no business keeping prices low, because they can’t — they’re fighting for their own survival.”
And isn’t maximizing your profit margin the whole point of capitalism? “I almost think whether we like it or not, we’re kind of denigrating the morality of companies if they’re looking for a higher margin,” says Craig Dubitsky, founder of Hello Products, based in Montclair, New Jersey. , an oral care brand. He is also chief innovation strategist at Colgate.
“If you have the ability to make a margin, does that mean there is a moral imperative for you to decrease your profitability so that your price is more affordable?” asks Dubitsky. “It’s a choice.” From his perspective, he thinks adversity, fear and scarcity are driving the conversation about greed and price gouging.
The economy may normalize as it moves away from pandemic economic policy. “I think 2022 will be a better barometer because now we’re thriving and now every business is running on its own,” Wink adds. “The stimulus dollars are behind them.”
Greedflation or not, rising prices are hurting small business margins. As production costs increased, Remedy began moving inventory to more distribution centers across the country to reduce shipping costs and lead times. Remedy’s product pipeline is full of high-protein drinks and other immune-supporting foods, such as elderberry, lion’s mane, maca, and more. The company buys all of its ingredients in bulk, but has purchased larger quantities to help with rising costs.
“We maintain a much larger inventory just to see the benefits of buying in larger quantities, but we are also strengthening our sources of supply to avoid shortages as well,” says Kasindorf.
Thanks to the larger scale of the business, Kasindorf says they’ve actually been able to lower prices on some products. But it also comes at a cost: “Because of some of these issues we’re seeing with price increases from our suppliers, we’re currently working on a lower margin,” he admits.
This is the trade-off that many businesses face in an inflationary environment. “Ultimately, we were less concerned about making incremental profits during this time and more concerned about just having a stable source of supply and less disruption on transportation,” says Kasindorf. “That has been key for us throughout this process.”