In America’s most recent presidential election, Democratic nominee Kamala Harris promised to ban “price gouging” on groceries, while Donald Trump said he would reduce prices by fixing supply chain issues.
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he → promise → issues
More recently, as food prices have risen 3 percent in the past year, Trump has promised to address higher consumer costs for beef by waiving tariffs on up to 300,000 metric tons of imported ground beef.
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Trump → rise → beef
But amid talk of price gouging and lack of affordability, what’s often overlooked is that profit margins for American grocery stores are actually slim: between 1 percent and 3 percent as of 2026.
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margins → overlook → 2026
The reason for this is simple—the average American has access to multiple grocery stores and is always on the lookout for better deals.
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American → have → deals
In 2024, consumers shopped at an average of two different grocery stores per week.
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consumers → shop → week
This year, 42 percent said they planned to switch to a less expensive store.
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they → say → store
“Food is something we have to buy every week,” said Mike von Massow, a professor of food, agricultural, and resource economics at the University of Guelph’s Ontario Agricultural College.
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Massow → have → College
“It’s an expenditure we’re going to make no matter what, so we’re more sensitive about it.
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we → ’ → it
The other thing that is a factor here is that we have a stronger understanding of what we expect to pay for food because we buy it every week.”
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we → have → it
Massow explained that the economics term for what a consumer expects to pay for something is the “reference price.”
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consumer → explain → something
Shoppers develop a strong reference price for food items because they shop at grocery stores so regularly.
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they → develop → stores
They’re more likely to notice a price increase on a grocery item than they would on something they purchase less often, like an iPhone or a pair of sneakers, and the most-discussed price hikes are usually on groceries people purchase the most.
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people → ’re → groceries
Politicians often talk about the price of eggs, milk, or beef; they talk less frequently about the price of artisanal hand-roasted peanut butter or gluten-free bagels.
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they → talk → butter
Jayson Lusk“I’m not saying [grocery stores] don’t have any control or power, but largely they’re scrambling around trying to figure out whatever they can do to respond to the latest consumer fad and trend.”
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they → say → fad
Grocery stores can operate in this highly price-competitive world because they’re volume businesses.
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they → operate → world
A 1 to 3 percent profit margin still translates to billions of dollars when the company is as large as Walmart, and the fact that the profit is spread over millions of daily transactions decreases the risks associated with low profit margins.
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profit → translate → margins
(This means that a local grocery store is an especially tough business to operate; most have even lower profit margins than the large chains, and survive by becoming members of buying cooperatives and developing strong relationships with their communities.)
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most → mean → communities
Grocery stores use two major pricing strategies.
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stores → use → strategies
One, called high-low pricing, involves attracting consumers with promoted sales on items priced lower than competitors and then hoping to make a profit from the non-discounted items consumers purchase while they’re there.
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they → call → items
The goods that bring consumers into the store are called “loss leaders,” and they’re often staple items in high demand.
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they → bring → demand
(The textbook example of a loss leader is the Thanksgiving turkey, which is usually sold near wholesale cost to attract shoppers who will then purchase other ingredients for their holiday meals.)
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who → sell → meals
High-low pricing was once the dominant business model for grocery stores, but with inflation making consumers even more sensitive to price increases, another business model is steadily gaining market share, especially with younger consumers: everyday low pricing.
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model → make → consumers
Everyday low pricing models, like those used by stores such as Walmart and Aldi, focus on having consistently low prices for every item in the store.
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models → use → store
Such stores make money in different ways: Walmart, for example, keeps prices low through its massive scale—nearly 1 in every 4 dollars spent on groceries in the U.S. is spent at a Walmart—while Aldi limits its selection, offering roughly 3 percent of the products a traditional grocery store has on its shelves.
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store → make → shelves
But under either pricing model, what influences prices are the costs of food manufacturing and distribution.
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influences → influence → manufacturing
Though food prices rose steeply at the end of the COVID pandemic, and in fact outpaced general inflation during the initial lockdown, economists say the price increases resulted from the unique strain the pandemic put on grocery stores’ supply chains.
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pandemic → rise → chains
For example, meatpacking plants were early hot spots for the spread of COVID due to the facilities’ low temperatures and cramped working conditions, and many plants implemented social distancing, which slowed production.
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which → implement → production
Illness and risk of exposure decreased labor supply for both grocery stores and food manufacturers, further increasing the cost of getting groceries on store shelves.
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Illness → decrease → shelves
Increased demand was also part of the picture; shuttered restaurants meant that people cooked more food at home, and therefore grocery stores gained some market power.
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stores → increase → power
But overall, the picture the evidence paints is far from one in which grocery stores took advantage of a crisis to hike prices.
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stores → paint → prices
Likewise, the spike in egg prices that became one of Trump’s talking points on the 2024 campaign trail wasn’t a result of grocery store price gouging.
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that → become → gouging
It was the result of an avian influenza outbreak that began in 2022 and killed millions of chickens, severely reducing the supply of eggs.
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that → begin → eggs
(An alleged price-fixing scheme by several egg producers may have also played a role, although the companies settled a federal lawsuit without any admission of guilt.)
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companies → allege → guilt
The grocery business is a “very competitive business,” Jayson Lusk, editor of The Oxford Handbook of the Economics of Food Consumption and Policy, told The Dispatch.
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Lusk → tell → Dispatch
“I’m not saying [grocery stores] don’t have any control or power, but largely they’re scrambling around trying to figure out whatever they can do to respond to the latest consumer fad and trend.”
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they → say → fad
In the past, consumers valued brands with established reputations, and grocery store brands, also known as “generic brands,” were considered lower quality.
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brands → value → brands
But modern consumers care more about price than brand reputation, and private-label brands, unhampered by advertising costs, tend to be cheaper and offer grocery stores slightly higher profit margins.
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brands → care → margins
Research also suggests modern grocery stores have as much brand reputation as food manufacturers themselves.
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stores → suggest → manufacturers
“Take Costco: They have their Kirkland brand and they’ve cultivated a quality image that is ‘good value for the dollar,’” Lusk said.
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Lusk → take → dollar
“Over time, what we’ve seen is some transference of that brand trust and reputation to the grocery store itself.”
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seen → see → store
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