High profits supermarkets and food companies, especially shareholder benefits

• Charlotte Klein

  editor Economics

• 

  Nick Walters

  editor Economics

Now that the annual figures of large food groups are known, it appears that they have not suffered from the rising prices of food. Their profits have actually increased, making their shareholders appear to be the winners of inflation. In recent years, they have received large profit distributions in the form of dividends.

Last week’s annual figures show that food companies have once again turned billions in profits. Ahold Delhaize came to 2.5 billion euros, Heineken made a profit of 2.7 billion euros, Unilever 8.3 billion euros and American food producer Procter & Gamble about 12.8 billion euros. Nestlé’s annual figures are yet to come.

Profit increases can also be due to factors that have nothing to do with food prices, such as the increased value of the dollar (according to Ahold Delhaize) or the sale of business units (as with Unilever).

Nevertheless, the rising prices of the past year seem to have been mainly attributable to consumers. What’s up with that?

“What I find interesting,” says Sustainable Finance Lab director Rens van Tilburg, “is that periods of inflation are used by companies to raise prices even more, because a lot is unclear to consumers and it goes unnoticed.”

Van Tilburg points out that a company like Shell has fixed production costs, while the oil price is determined on the world market. “But I find it amazing that a company like Unilever does this. They take too little of the pain.”

The Unilever CEO does not think so, he said earlier that the company will pass on only 75 percent of the higher costs. Ahold Delhaize points out that its profit margins fell by 0.1 percent worldwide, and even more in Europe.

‘Shareholders number one’

Van Tilburg is concerned that large companies are making higher profits at the expense of consumers. “Ahold says the customer comes first, but you don’t see that in the numbers. The shareholders come first. That’s a bad thing, because there’s no social reason why they should do that.”

In the Netherlands, according to Van Tilburg, the Rhenish capitalist model was long the norm. The aim is to strike a balance between the interests of shareholders, employees, consumers and society.

But since the 1990s, Van Tilburg has seen a shift to the Anglo-Saxon model in large Dutch companies, where the market determines the priorities. And according to the director, that quickly lies in making money.

“These multinationals could have chosen, for example, to curtail price increases or raise their employees’ wages, but they choose themselves first with top benefits, and then their shareholders.”

According to Van Tilburg, the rules must be tightened to make value for society the most important pillar again. “It has been tried by a group of lawyers before to get this more explicitly into the law, but they did not succeed.”

Exude confidence

According to Joost Schmets of the Vereniging van Effectenbezitters, it is not necessarily the case that shareholders expect dividend payments to be increased. “As a company you exude confidence with it: things are going well here, we no longer need investments and we give money back.”

According to Schmets, shareholders also do not benefit if, for example, the consumer pays too high prices, “Because then they go to the competitor and that is ultimately not good for the shareholder.”

The companies not only increase the dividend, but also buy back their own shares. This also directly benefits the shareholders, because the value is divided over fewer shares.

For example, Ahold Delhaize will buy back its own shares for 1 billion euros this year. Unilever announced in 2022 that it would buy back shares for 3 billion euros.