Manipulating Supply Chains and Manufacturing, for Corporate Influence and Profit . . . Redux

It is getting serious now. Kroger is willing to sell off more stores in order to consolidate with Albertsons. The one thing we keep on seeing is the manipulation of supply chain due to circumstance to achieve manufacturing shortfall, and influence, to maximize profits. Much of what we have and are experiencing was avoidable. The tools exist to give better perspectives of what is going on from start to finish of product. As you read through my telling of what I see, you will get near the end and run into a link to a Vox article. It supports what I am saying and have seen over the decades.

A quarter of a century ago, Eric Schlosser’s book Fast Food Nation called attention to the acceleration of corporate, quasi-monopolistic control of America’s food system. The fallout of which has led to harmful consequences for workers, consumers, livestock, and the land. Those forces identified then are even more powerful today.

AB: Truth be and a disclosure, I have not read the book. However, it is called out in Eric’s Schlosser’s (author) article in the April 9th “The Atlantic.” This I do read and it travels with me on long plane trips as no reading material exists in the seat pouches anymore. And they no longer pass out newspapers.

Fast Food Nation takes on fast food and the evils of it. Nutritional value is certainly missing, And then there is the salt content and fat issues to be dealt with. But, fast-fooding-it can satisfy the taste buds while destroying the body. Beats Soylent Green.

A quarter of a century ago is not 2008. During the almost economic collapse of the nation, we did experience similar and not so catastrophic shortages. If you do not recall what they were or were too young to know of it, semiconductors were in demand then. While many of these were sourced in the US, we were still pulling them from other places such as Malaysia and some were being packaged closer to US shores. Onsemi was stilling growing wafers in the US.

During that brief period, the companies shut down because automotive did not maintain their orders. With no OEM orders, we could would not order from the semiconductor companies. Automotive OEMs had a reputation of stiffing their supply base. No smaller company would take on the risk of being stuck with an OEM’s designated supplier order. When the OEMs came back to life again, it was not a gradual turn on. It was an all-out demand turn-on. The middleman got stuck with the issues and also could not reject the price increases which came as take it or leave it and find another supplier. Qualification requirements would have killed the supply base (us).

Major suppliers learned from this event. Come the next time in 2020, they applied the same methodology used in 2008. Greater globalization of the US supply base added to the issues we were experiencing during 2020-2022. Components come by containers which are three weeks on the ocean (alone) when no conflicts exist. Air freight is far more expensive. And the OEM part supplier to the middleman just pass the costs along. Ford and GM typically will push back on pricing increases. Marquardt told Chrysler one time to pay them otherwise it will shut down the US plant and go back to Germany. Chrysler paid.

Except with food we are seeing a consolidation of the grocery suppliers in the US. Kroger and Albertsons announced a planned merger that would create a single entity that could control 22 percent of the US grocery market. In size this is second only to Walmart’s 25 percent share of US grocery purchases. Two giants controlling almost 50% of the groceries in the US.

The consolidation of the two giants includes Krogers’ Ralphs, Dillons, Smith’s, King Soopers, Fry’s, QFC, City Market, Owen’s, Jay C, Pay Less, Baker’s, Gerbes, Harris Teeter, Pick N’ Save, Metro Market, Mariano’s, Fred Meyer, Food 4 Less and Foods Co. Albertson’s would bring with it Safeway, Vons, Jewel-Osco, Shaw’s, Acme, Tom Thumb, Randalls, United Supermarkets, Pavilions, Star Market, Haggen, Carrs, Kings Food Markets and Balducci’s Food Lovers Market. Kroger expected revenue in 2023 $150.03 billion. Alberson in 2023 was $79.163 billion.

To make the consolidation palatable, both corporations are selling off companies within their portfolios. Their intent is to show there will be greater competition in the end and they are less of a threat. The FTC is not buying it and has filed suit to stop the consolidation.

Krogers will off of the Albertson’s in Arizona. It would not do it unless it would make it up in other gains. If the consolidation is that good, FTC should hold out of more or just say no to the consolidation.

The likelihood of the consolidation of Krogers and Albertsons being less of an economic threat by selling off a few hundred stores will not result in control of the grocery economic supply chain. Similar to what was experienced in 2008 with companies making pricing decisions based upon supply chain control of manufacturing and inventory, we have experienced similar in 2020-2022. Indeed, in 2023, Vox reported on how effective the excuse of a pandemic worked in justifying price increases.

Chris Becker, senior economist at the Groundwork Collaborative, a progressive economic advocacy organization. “Corporate profits have hit their highest level ever, and corporate profit margins — how much they’re making on each unit that they’re selling — have hit the highest level in 70 years.”

As Vox points out, the narrative is: “The typical explanation of Covid-19-related inflation goes like this:

The pandemic disrupted the flow of the global supply chain. How much it costs companies to make a good or provide a service went up. Other crises piled on; the Russia-Ukraine war, for example, drove up the price of key commodities like oil and wheat. In response to all of this, companies raised prices to offset their higher costs.”

Sound familiar? Costs of semiconductors went up under similar situations other than stopping mfg. altogether. Neither had to be. Circumstance opened a door for companies to manipulate the market, control manufacturing output, and raise pricing.

What Biden and the administration has done is pushback of corporate economic influence with such things as challenging the merger between Albertson and Kroger. Biden pushing Long Beach and Los Angeles longshore workers to go to overtime to clear the docks of containers sould not have been needed. Corporations could have pushed for this.

This is one part of the story. I spent a lifetime in manufacturing and supply chain. I know what I would have done when I had control.