All right, welcome back. It's Friday.
Let's do it as energy costs soar labor shortages
continue and supply chain disruption sweep the nation.
The annual inflation rate accelerates to 7.5%, the highest since 1982.
Of course we're not the only ones grappling with skyrocketing rates. The U. K.
Inflation rate even hit a new 30 year high
just this week.
But while americans are scratching their heads,
gas stations and grocery stores and adjusting their spending habits,
corporations are finding some silver linings.
For example,
look at, look at this photo, look at this photo.
I never know what graphics they're gonna make. Thank you to my team.
That's incredible.
For example, Starbucks recently announced it will raise prices, raise prices
more than once over the next year.
The company also reported a massive increase in profits in revenue last quarter,
but they're not just hiking the prices of your latte, Starbucks.
Ceo himself got a pay increase by nearly 40% last year to more than $20 million.
Must be nice joining me now to discuss
the story as well as that graphic paul,
constant writer at Civic Ventures and co host of pitchfork economics podcast
paul, Welcome to the show. Our corporations using inflation as
an excuse to boost their profit in ways that are not necessary.
Yeah, I think so. I mean, you know, I think it's not even an excuse really.
They're kind of bragging about it honestly.
You know,
uh if you listen to any of the quarterly reports that corporations
have made over the last few uh last couple of quarters.
Um They are just openly talking about raising prices on consumers,
you know? Um Let me see, I have, I've got a list here.
There's a Procter and Gamble's executives said in The Wall Street Journal,
the pricing has been a positive contributor to their
top line and that the consumer is very resilient.
Uh Kroger grocery chain ceo was bragging on CNN that a
little bit of inflation is always good in our business.
Um
Chipotle's Ceo, who gave himself 100 and 37% raise, which is very nice of him,
said that Chipotle is literally achieving new highs on all fronts.
And he told CNBC that we have room to take more if we have to in terms of prices,
meaning they can raise prices to bolster their profits.
So I mean it's it's it's pretty much right out there in the open right that
this is not some invisible hand of the market that's turning up the dial on prices.
It's
it's uh corporations who are making the most of it,
uh making the most of a catastrophe, which is real inflation,
which is a real problem that is happening all over the world as you said.
And uh and just uh I think it's fair to
say that we're moving into the territory of price gouging,
honestly.
So is it not?
Okay, So let's take a poll, for instance,
is it not that Chipotle is now forced to spend more for their beans, their lettuce,
they're sour cream, etcetera, etcetera.
And now saying, well,
we need to raise the prices to pass the cost down to the consumer.
Is that not what's happening?
No, that's not what happened. That's not what's happening at all.
I mean, uh, probably, uh, the revenue grew 22% last year, right?
That's almost like a quarter, you know, 25% increase on their profits.
So, uh, they're, they're doing just fine.
Like you would think that at some point, um, they would not need to, uh,
to hit the golden, you know,
golden parachute and rake in these record profits
and maybe work with their consumers a little bit
to absorb some of those prices for a little
while until inflation starts to go down again.
Uh, what are some other companies that are using some of this inflationary?
You mentioned a few. Yeah, name checked me a few more
sure constellation brands,
which sells Modelo and Corona and other beers and alcoholic brands set on the,
their Q four call, uh,
to investors that we want to make sure that
we're not leaving any pricing on the table.
We want to take as much as we can.
We'll take as much pricing as we think the consumer can absorb,
which is just like outright saying it right?
Like they're saying they want to raise prices and
they're using inflation as a cover and uh,
the consumer can absorb line shows up all over the place, right?
Like Procter and Gamble saying they're resilient.
Um, Tyson Foods, Ceo told Reuters were asking customers to pay for inflation
not to pay some of inflation to pay for inflation and its entirety.
It's just like, it's, it's just right out there.
If you, if you, if you read any of the business columns,
this is what's going on right now.
Okay, So you just mentioned Chipotle, Tyson,
Procter and Gamble and these are all publicly traded companies.
Is there a suggestion that non publicly traded
companies are engaged in this as well?
Non publicly traded companies. That's a good question.
I mean, I think that you're seeing prices go up right?
Like I, you know, I don't object to my neighborhood restaurant raising prices,
right.
I don't object to the local coffee shops raising prices because they're clearly,
uh, they're clearly, you know, they're paying more.
So it makes sense that the customer would carry some of that.
I would expect that they would,
they would probably share some of the
pain of inflation with us.
Um, so, but when you're looking at at, uh,
enormous multinational national corporations,
I think there's maybe an expectation that that they should do a little bit more to,
to, to carry the weight for consumers.
So let me ask you about a different company.
I don't know if you're prepared to talk about this one and pardon me looking at
my computer because I'm doing some quick number
crunching here at the ceo of dollar tree.
Dollar tree made a lot of news a few months ago because suddenly dollar tree is like,
sorry folks, dollar tree is not dollar tree,
Dollar tree is now dollar 25 tree because of inflation.
Meanwhile the ceo of that company made over $10 million last year though,
blamed inflation explicitly for the price hikes that made
national headlines because this is a beloved chain and
a lot of people rely on basic goods and services and food that comes from Dollar tree.
Um how is that indicative of the broader of the broader crisis here? Right.
And, and I guess to your point,
I would assume you think it's fair in the same conversation to say,
okay, that's all well and good. You want to rise prices.
But let's not forget to remind people of the absurd gobs of money that the C E O.
S are taking home.
Yeah, absolutely. I mean to call back to Kroger, right?
They closed, I'm in Seattle uh they closed a couple of stores,
one in Seattle one in Long beach because our local city councils asked
them to pay a little extra hero pay for their employees uh,
during the pandemic.
And so they closed some low performing stores At the same time.
They did a $6 billion dollar buyback stock
buyback that just enriches shareholders and executives,
many of whom, you know get stock as a, as a bonus
and it's just giving the money away to them no strings attached, right? And
you know, we're breaking records in terms of corporate profits corporations,
Matt Stahler pointed out in his excellent substack
Before the pandemic corporations made about $1
trillion Great Recession and right before the pandemic
Last year, that number jumped to 1.73 trillion in profits. It almost doubled.
Um and you know, it's just it's just it couldn't be clearer where that money is going.
It's it's it's being leveled out into executive pay and in stock buybacks and
none of that is being reinvested in the consumer,
which is what you would expect a
business that was interested in sustainability to do
paul amount of time. But you weren't against trickle down.
Fearmongering quickly if you can. What should people know,
I think that you know, you should know that that inflation is very real,
It's caused by the pandemic right?
And it is something that uh that uh you're not crazy the prices are going up,
but people will want to make you believe that that prices
are going up because wages are going up in America,
they're not going up as much as inflation
but they're still going up where they want you
to believe that it's because of uh stimulus
payments to americans and that's not the case.
Um you know the way out of this is to keep investing
in America's working class and to stop handing off money to C.
E. O. S.
And elites and and their corporations, um you know,
like we need to get the working class spending money again,
which is how we will build our way out of this inflationary mess.
Paul constant is writer at Civic Ventures, also co host of pitchfork Economics
podcast, paul thanks a lot, happy friday,
really important conversation and a great perspective.