The National Grocers Association is looking to Congress and federal regulators to investigate what it alleges are illegal and anticompetitive business practices from the biggest food retailers in the United States, and the claims include a look at private label practices.
“FTC should immediately use its authority under 6(b) of the Federal Trade Commission Act to study competition and concentration in the grocery supply chain, including private label, and the impacts on independent grocers and producers, such as farmers and ranchers,” according to NGA.
On March 16, the association released a 24-page document titled, “Buyer Power and Economic Discrimination in the Grocery Aisle: Kitchen Table Issues for American Consumers,” claiming actions of large retailers, especially during the pandemic, have infringed on the existence of a healthy grocery ecosystem and argue that congressional action and investigations by the Department of Justice and the Federal Trade Commission are needed.
“Many consumers have lost access to products at their local grocers. Moreover, rural areas and urban centers that are served by independent grocers have suffered a disproportionate impact, with consumers being force to travel longer distances to find products they need at more crowded large chain retailers,” according to NGA..
At specific points in the document, the NGA looks at private label and store brands:
- “Store brands are important alternatives to branded products for consumers and retailers alike. But under pressure from dominant retailers, the private label sector is consolidating dramatically. For example, today there is only a single major private label manufacturer of canned soups, and there is significant consolidation in private label manufacturing in a diverse list of other products from canned fruit and pasta, to snack foods, and paper products.”
- “Dominant retailers effectively dictate supply decisions to grocery suppliers. This has become particularly acute in private label. For example, private label manufacturers are forced to prioritize runs ordered by their biggest buyers, limiting capacity for products sought by independents. They have also narrowed their available products in order to serve demand from power buyers, reducing product diversity and consumer choice.”
- “Some private label manufacturers have largely dedicated their capacity to dominant national chain grocers, foregoing independents’ business almost entirely. Not only does this harm independent grocers and their customers directly, through loss of these popular products especially for cost-conscious consumers, it also reduces independents’ bargaining leverage with branded suppliers by eliminating alternative sources of product supply to which independents might switch.”
- “The independent grocer’s wholesale price for a branded cake mix was 53 percent higher than the Walmart retail price. And the wholesale price for a staple branded cracker, on a per ounce basis, for the independent retailer was nearly 20 percent higher than the retail price at Dollar General. Other NGA members have reported paying higher wholesale prices than the retail prices available at large chains for many of their top private label products, including salsa, ketchup, mustard, barbeque sauce, peanut butter, canned fruit, soup, broth, vegetable oil, granulated sugar, flour, and coffee, and numerous members reported paying higher wholesale prices than the retail price for other popular branded products.”