With grocery costs skyrocketing amid unprecedented rates of inflation, consumers have lost track of what exactly is driving up the prices of essential items.
But the main source of product price jumps is one that buyers often don’t consider: the sneaky, excessive tariffs that catch food manufacturers by surprise.
George Milton, who runs a hot sauce business in Austin, Texas, told the Wall Street Journal: ‘Is this an increase in prices or costs for distributors, retailers or farmers? I have no idea. Nobody does.’
Food manufacturers have been forced to raise their prices to keep up with the tariffs imposed on them by distributors and grocery stores.
Distribution companies are responsible for the intermediate stage from manufacturers to grocery stores.
Rising food costs unnerving American consumers can be attributed to fees charged by food manufacturers by grocery stores and distributors.
Overall food costs increased 2.4 percent from September 2023 to September 2024.
Some popular ones that sell products to stores across the country are KeHe Distributors, C&S, and United Natural Foods.
Milton said relying on distributors can be expensive and they can be cryptic about their rates.
You are often charged fees that make it unclear how much, if anything, you will be paid.
“That’s a really difficult way to run a business,” Milton told the Wall Street Journal. ‘But what’s the alternative, to mail it from one place to another?’
The outlet reported that food manufacturers may be hit with fees from grocery stores if distributors deliver their products late or in a partial shipment.
Distributors can also pass on fees related to shelf space and promotion from grocers to food manufacturers.
Companies may even add additional charges for processing those fees.
Food manufacturers have been forced to raise their prices to keep up with the costs and fees imposed on them by distributors and grocery stores.
If a distributor buys too much from a manufacturer and the product spoils, they can charge spoilage fees. But the same thing happens if a food supplier makes a smaller order to avoid spoilage.
“This is all the Wild West,” Jack Acree, who has worked with multiple food brands, told the Wall Street Journal. “There are very few rules.”
These burdensome expenses have food producers as bewildered as consumers and have left many of them without no choice but to increase the cost of their products.
Kyle Koehler, CEO of granola maker Wildway, said he was forced to raise the price of his product because of distribution costs.
“Once brands start realizing how much they cut at the top, there aren’t many options,” he said. “It’s either going out of business or raising my price to weather the storm.”
The owner of spice maker My Family Seasonings, Christine Quinn, said she almost went bankrupt because her distributor paid her 40 percent of what she charged for her products.
Food distributors are also struggling to make profits in the current state of the economy.
As a result, it had to increase the cost of its condiments. Four ounces of a rib spice blend used to sell for $4.99. Now, customers must spend $6.99, the Wall Street Journal reported.
Based on the latest Consumer Price Index ReportOverall food costs increased 2.4 percent from September 2023 to September 2024.
From August to September prices increased by 0.2 percent. These figures take into account both purchases in supermarkets and restaurants.
Deb Conklin, CEO of food distributor KeHE, said three-quarters of the fees come from grocery stores.
But even distributors contributing to these price increases said they are not making significant profits.
“It’s almost impossible to make money as a distributor,” James Curley, who has worked for both manufacturers and distributors, told the Wall Street Journal. “It’s just the nature of the business.”
Although they pay a lot of fees, distributors are struggling to make a profit due to a lack of ability to limit operating costs, which are rising like everything else.
Donald Trump has addressed inflation and food costs as a major component of his campaign.
Conklin told the Wall Street Journal: ‘Doing business has costs. “We don’t charge for charging.”
Rising costs have been a hot topic for both Donald Trump and Kamala Harris ahead of Tuesday’s election.
One of Trump’s campaign promises is that if elected president, he will reduce the everyday costs Americans incur.
During a rally in August, Trump talked about inflation and rising costs in general.
“People go to the supermarket and have less than half the supply,” he said.
Kamala Harris has vowed to reduce food costs by banning corporate pricing.
Harris has proposed ambitious plans to reduce Americans’ food costs while distinguishing herself from Joe Biden’s administration.
She called for a federal ban on corporate price measurement during the first 100 days of her presidency, if elected.
The proposal would also crack down on mergers of large food corporations that would allow the companies to raise food prices and undermine competition, Harris’ campaign said.