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As food costs have skyrocketed for Americans, some of the country’s biggest chains and grocery brands, including General Mills, PepsiCo, and Tyson, have blamed the price hikes on supply chain issues and economywide inflation. But behind the scenes, these companies have expanded profits and quietly authorized billions of dollars in lucrative stock buyback programs and dividend payouts to shareholders.

Americans paid roughly 25 percent more on groceries and dining out this March than they paid in January 2020, outpacing the rate of general inflation. Over that same period, the companies behind the country’s 10 largest grocery and restaurant brands have together returned or pledged to return more than $77 billion to shareholders. 

The Department of Agriculture calculates that the average American spent 11 percent of their disposable income on food in 2022, the highest amount in nearly four decades. Grocery prices rose over 10 percent that year alone, the largest annual increase since the 1970s. 

In March 2024, consumers spent 95 percent more for a carton of eggs, 33 percent more for a pound of ground beef, and 22 percent more for a gallon of milk than they did before the pandemic. One survey found that a whopping 90 percent of adults say they’re concerned about the cost of groceries, and food costs topped consumers’ list of economic concerns. According to an analysis by Food and Water Watch, a corporate watchdog group, food costs for an average family of four living on a “thrifty” budget increased 50 percent from January 2020 to January 2024, from $654 to $976 a month.

Since pandemic-era expansions to the social safety net expired at the end of 2021, hunger has been on the rise. The number of households facing food insecurity grew by 3.5 million between 2020 and 2022. Households with children are particularly vulnerable to food insecurity, growing by 24 percent between 2021 and 2022 alone. The Department of Agriculture estimates some 28 million adults in America lack constant access to enough food to lead an active and healthy life, forcing them to eat unbalanced diets, cut portion sizes, and skip meals.

This spring, a group of Democratic senators called on the Biden administration to use executive action to address rising food prices.

“Big food companies want to keep these huge profits and they’re hiring plenty of lobbyists to keep Congress from acting,” Sen. Elizabeth Warren (D-Mass.) told Time. “Congress has stalled out on doing work that it could do to help families lower costs… and the President has the tools to fight back.”

When pressed, the nation’s biggest food processors and retailers say they’re doing their best to keep prices down and continue to blame inflation. But as these companies hide behind “difficult times,” they’re spending billions of their record profits buying back their own shares on the open market to inflate stock value and issuing generous dividends.

The main purpose of buybacks is to enrich senior corporate executives and hedge-fund managers, said University of Massachusetts economics professor Bill Lazonick. 

These people are “[making] money out of money,” Lazonick said. “The rich are getting richer, that’s the point… And we as consumers are paying for [it].”

“A License To Loot”

PepsiCo’s Chief Financial Officer Hugh Johnston told Bloomberg last year that consecutive double-digit price hikes on their products in recent years were “just there to cover inflation,” and that consumers see PepsiCo products as “worth paying a little more for, while they may not be able to afford the big luxuries in life.” 

Those luxuries in life are apparently reserved for top investors, including Johnston himself. In 2021, he took home $4.6 million in shares as part of his generous compensation package.

In 2023, PepsiCo raked in $91 billion in net revenue, a 35 percent increase over pre-pandemic income. Of its profits, the company poured $7.7 billion into repurchasing stock and issuing dividends, with buybacks increasing 843 percent from 2021. In-house analysts expect total cash returns to shareholders will grow to $8.2 billion this year.

According to Lazonick, during much of the 20th century, large-scale stock buybacks in the form of open-market repurchases were considered legally risky and rarely, if ever, practiced. That changed when the Reagan administration’s Securities and Exchange Commission opened the floodgates on buybacks and the resulting stock price manipulation by essentially legalizing the practice within broad limits.

“Today, the limitations on buybacks are negligible, Lazonick said. “[This] gives corporations, what I like to call, a license to loot,” he added. “It’s manipulation, it’s nothing else… the SEC [is overlooking] manipulation.”

Matt Gardner, senior fellow at the Institute of Taxation and Economic Policy, a tax policy advocacy group, said buybacks boomed right before the pandemic when Trump-era tax cuts left corporations with extra cash on hand. Advocates for the tax cuts claimed companies would reinvest that profit back into the economy via manufacturing and jobs — but many began pouring huge sums of money into buybacks instead. 

“[Buybacks] don’t have any socially productive function, per se,” said Gardner. “The real beneficiaries are the companies themselves and the owners of the stock.”

Tyson Foods more than doubled profit margins between 2021 and 2022 after hiking prices for beef, pork, and chicken by upwards of 30 percent. The company — which is currently being investigated by the federal government for child labor violations and paid $10.5 million to settle allegations of price fixing in Washington state — claims it raised prices because it needed to offset increased costs in labor, transportation, and grain for animal feed. 

But data from earnings reports, reported first by More Perfect Union, paints a different picture: While increased operation costs set the company back $1.5 billion dollars in 2022, price increases expanded profits by $2 billion, meaning consumers covered Tyson’s inflation costs plus shelled out $500 million more. That year, Tyson repurchased $702 million of its own shares and raised dividends by 4 percent.

Corporations are “slow to pass on their savings to consumers,” said Lindsay Owens, executive director of the Groundwork Collaborative, a progressive think tank and advocacy group. A recent report from the organization finds that while climate and pandemic disruptions to the supply chain continue to inflate input costs, retailers and suppliers have “taken advantage” of global inflation to expand profits.

The manipulation is occurring up and down the supply chain. “Everyone’s taking a little bit of margin here,” Owens said. 

The Federal Trade Commission found back in March that Walmart, Kroger, and Amazon “used rising costs as an opportunity to further hike prices to increase their profits.” According to the agency, food and beverage profits increased 7 percent over costs in the first three-quarters of 2023, “cast[ing] doubt on assertions that rising prices at the grocery store are simply moving in lockstep with retailers’ own rising costs.”

On a 2021 call, Kroger chief finance officer Gary Millerchip reportedly told analysts, “We’ve been very comfortable with our ability to pass on the increases that we’ve seen at this point, and we would expect that to continue to be the case.” That year, the company pulled in revenues of $137 billion, a 12 percent increase over pre-pandemic sales. They returned profits to investors in the form of $589 million in dividends and $1.6 billion in stock buybacks. 

Walmart’s price hikes went viral last year when customers compared a 2020 trip receipt to one from 2023 and found the cost of some of the retailer’s Great Value generic brand products had increased by more than 50 percent. Walmart raised the price of staples like milk and frozen meals in 2022, helping expand grocery sales by double digits over the previous two years. 

The retailer’s total revenues reached $611 billion in 2023, and executives authorized $9.9 billion dollars in share repurchases, a 277 percent increase over 2021.

Per Lazonick, “shareholder value ideology” legitimizes the profiteering. Executives, whose own take-home compensation packages are substantially padded by stock options and stock awards, can justify increasing their own income in the name of maximizing shareholder value — at the expense of consumers and workers. 

Buybacks and dividends do nothing to actually improve a company’s competitive performance. “To be innovative, to be competitive,” Lazonick said, “requires developing and utilizing productive capabilities [and] is far more difficult.”

Smaller Portions, Higher Prices

It’s not just that prices are going up — food products are getting smaller, in a phenomenon that pundits have named “shrinkflation.” Another report from the Groundwork Collaborative finds that changes to package size account for 10 percent of all price increases on key household expenses, including snack foods.

President Biden even mentioned the matter during his State of the Union this year: “Same size bag — [they] put fewer chips in it,” he said. “No, I’m not joking. It’s called shrinkflation.”

After the snack brand Utz reportedly shrank the sizes of its pretzel jars and potato chip bags, the company’s CEO admitted that changes to “price pack architecture” accounted for a striking 20 percent of the company’s price inflation. Even more damning, a 2022 company earnings report plainly states that “pricing actions,” or price hikes, helped boost the company’s gross profit margins by 25 percent. Between 2021 and 2024, Utz increased its cash dividend payouts by 18 percent. 

General Mills hiked cereal costs by 12 percent between 2022 and 2023, while also reportedly reducing the family-sized box from 19.3 ounces to 18.1 ounces. When pressed on the shrinkage, a spokesperson for the company told NPR that it allowed for more efficient truck loading, reducing the company’s fuel costs and covering for input inflation. However, behind the scenes, company executive Jon Nudi confided in investors that the company was “getting smart about how we look at pricing” while carrying out “list price increases.”

Since the pandemic, General Mills’ annual net sales have grown 19 percent, topping out at $20.1 billion in 2023. Last year, the company bought back $1.4 billion of its own stock from the open market, up from $877 million the year before. 

Americans who elect to save money by heading to the drive-thru are facing a new reality, too. A study of the country’s biggest fast food brands by Finance Buzz found that at all of them, menu prices have outpaced general inflation rates.

The CEO of Yum Brands, which owns Taco Bell, KFC, and Pizza Hut, said in 2023 that the company’s price hikes were “a last resort”; that same year, the company brought in $7 billion in total revenue, a 21 percent increase over its pre-pandemic earnings. Executives at the corporation have since authorized a $2 billion share repurchase program and returned $678 million to shareholders in dividends.

Since 2014, McDonald’s has doubled its menu prices, helping increase profits by 59 percent in 2021 alone. Just last week, McDonald’s U.S. president Joe Erlinger, miffed at accusations of price-gouging and viral reports of the $18 price of a Big Mac, called that price “an exception” and maintained the company’s franchisees are “work[ing] hard to minimize the impact of price increases.”

After a brief pause in 2020, the fast food giant resumed its $15 billion buyback program in 2021 and returned a total of $7.6 billion to shareholders via buybacks and dividends in 2023. 

Big Grocery’s Opposition

According to Owens, monopoly power and consolidation across all levels of the supply chain are emboldening megacorporations to engage in price fixing — using their market control to artificially inflate prices. A 2021 investigation by The Guardian and Food and Water Watch of the top food items sold in U.S. grocery stores found that four companies or fewer controlled at least 50 percent of the market for 79 percent of the groceries sold. For nearly a third of shopping items, top firms controlled 75 percent of the market share.

The consolidation is particularly stark among retailers; Walmart alone takes in 25 percent of grocery sales nationwide. Just this year, the Federal Trade Commission sued to block a $24.6 billion merger between Kroger and Albertsons, alleging it violates antitrust law.

“Everything you see as you stroll down the grocery aisle — lettuce in aisle one, beer in aisle five, pretzels and potato chips in aisle nine, ice cream in the frozen food aisle —” said Sen. Warren during a recent hearing, “is dominated by a handful of Big Food producers.”

Warren led the group of Democratic senators who called on Biden to combat rising food prices, including by investigating major grocery retailers for price fixing. In a letter, the coalition recommended, among other actions, that regulators work to prevent mergers and acquisitions in the industry and outlaw the kind of exclusionary contracting big firms use to box out smaller suppliers.

These recommendations are similarly outlined in legislation currently stalled in committee: Warren’s Price Gouging Prevention Act and Senator Bob Casey’s (D-Pa.) Shrinkflation Reduction Act. Casey’s legislation would direct the Federal Trade Commission to establish regulations limiting shrinkflation, and authorizing civil prosecution of companies that engage in the practice. Warren’s bill would make price gouging a federal offense.

Americans are largely supportive of efforts to regulate how much companies charge for food. In a new Data for Progress poll, 69 percent of respondents said the government “should do more to regulate grocery stores that raise prices to maximize profits.”

Meanwhile, consumers have made known their displeasure at high prices. Grocery retailers are feeling the sting of backlash as customers abandon brand-name items, shop at discount stores, and forgo buying more expensive items.

Grocers like Walmart and Target, and fast food brands like Wendy’s and McDonald’s are only the latest brands to bring down prices in an attempt to woo customers stretched thin by inflation. For many Americans, however, the damage is already done.

Veronica Riccobene is a producer based in Washington, D.C. She has experience in live television, long form and vertical video, as well as reporting.