A few days ago, I wrote about supermarket pricing policies. Few topics generate more vituperative mail.
The syndrome goes beyond recent increases in food prices. In a nation that is a bastion of capitalism, millions of people fear, distrust and even hate large business enterprises.
Let me illustrate.
Recently I wrote about supermarkets that mark up prices on items already in stock. A Safeway spokesman said that his company ended such markups in 1974, but that in 1976 it was forced to resume the markups because wholesale prices began zooming.
One reader responded, "Your Safeway spokesman is a liar. I am enclosing the top of a package of Jello that has three price stickers on it. It has been repriced twice. He's a liar."
I am baffled by this reaction to a spokesman who acknowledged that his firm had resumed marking up shelf prices in 1976.
A letter from a Silver Spring man said, "Safeway and Giant set their prices to meet a predetermined profit goal, not to meet the competition. Some independents consistently undercut the 'majors' on a broad spectrum of national brands. Your claim that the chains make a profit of only 1 or 2 percent is downright specious. When a merchant marks up an item 50 percent over his original selling price, he is taking an undeserved windfall profit."
Another letter added, "We both know that you can throw all kinds of expenses into an operation to make it appear that profits are low. For example, grocery clerks are now making well above professional salaries."
In response, let me say this:
Every business bases its pricing policies on the predetermined goal of making a profit. A firm meets price competition, even to the point of selling at a loss, only when it must.
Periodically, merchants advertise cut-price "specials" to bring people into their stores. A store that happens to be running specials on items you want to buy at that moment will appear to have generally cheaper prices, but that impression may be erroneous.
An independent may be able to cut some prices if it does not pay union wages. Safeway and Giant have union contracts. They start full-time clerks at $5.82 an hour, and after two years raise them to $7.69. A meatcutter gets $8.59 an hour after two years. What professional works for $7.69 or $8.59 an hour these days?
When inflation is so severe that the price of a grocery item can shoot up 50 percent between purchases, it becomes impossible for an industry that earns a profit of less than 2 percent to absorb such increases. Safeway has 2,428 stores. If it stocks 50 pounds of raisins in each store, its raisin inventory is 121,400 pounds. Raisins have just about doubled in wholesale price recently. If Safeway sells out its inventory at the old price, where will it get the capital to buy 121,400 pounds of raisins at the new price? Keep in mind that inflation affects every one of the 10,000 items that grocers stock.
Safeway's "insiders" (management) own 1 percent of the company. The other 99 percent is owned by 55,035 individuals who have invested their savings in the company and are entitled to a reasonable return on their money. Would Safeway's critics describe the payment of fair wages to 140,000 employees as "throwing all kinds of expenses into the operation to make it appear that profits are low"?
On the $11,249 million worth of business it did last year, Safeway made a profit of $102 million - nine-tenths of one percent, or 9 cents on a $10 order. The average store sold $4,633,000 worth of food during the year and ended up with a profit of $42,133.
One final point: Several readers say the reason prices are so high is that "thousands of gallons of milk go down the sewer and thousands of loaves of bread are thrown away because their 'pull dates' have expired." Readers ask why such items are not given to charity instead of being wasted.
The answer is that both Giant and Safeway monitor milk and bakery sales carefully and deliver fresh supplies so frequently that almost nothing remains unsold when its pull date expires. Day-old bread and bakery goods are marked down to half price and sell out at once.
The only milk that's poured down the drain is milk from containers that have sprung a leak. As the Safeway spokesman put it, "When there is a possibility of contamination caused by a damaged carton, we will neither sell the milk nor give it away. And on the rare occasions when pull dates expire, we do give the food to charity."