Heisse Preise

September 17, 2023 12:00 AM

"In Austria, inflation is way above the EU average. There's no end in sight. This is especially true for basic needs like energy and food. Our government stated in May that they'd build a food price database together with the big grocery chains. But...."

Mario Zechner's Heisse Preise web scraping project was ready far earlier than the Austrian government's proposed plan and also included every product instead of a small basket of them. The results showed not only price increases above inflation, it also revealed evidence of price collusion between different stores.

posted by autopilot (45 comments total)

Tangentially related, Carrefour puts ‘shrinkflation’ price warnings on food to shame brands:

Carrefour has marked 26 products in its stores in France with the labels, which say: “This product has seen its volume or weight fall and the effective price from the supplier rise.” For example, Carrefour said a bottle of sugar-free peach-flavoured Lipton iced tea, produced by PepsiCo, shrank to 1.25 litres (0.33 gallon) from 1.5 litres, resulting in a 40% effective increase in the price a litre.

posted by autopilot at 1:20 AM on September 17, 2023 [20 favorites]

Inflation is always and everywhere a monetary marketing phenomenon.
posted by chavenet at 2:33 AM on September 17, 2023 [8 favorites]

I assume that these grocery stores in Austria aren’t breaking any laws. End stage capitalism money grab.
posted by waving at 2:59 AM on September 17, 2023 [1 favorite]

One of the first big Mastodon threads. Way of the future.
posted by michaelhoney at 3:40 AM on September 17, 2023 [16 favorites]

Before trumpeting the good deeds of Carrefour, in exposing these pricing practices with warning labels:

Consumer groups say shrinkflation is a widespread practice, which supermarkets like Carrefour are also guilty of in their own-label products.

So... they are attempting to funnel people away from overpriced brand name products, into buying overpriced in-house products. Clever, and maybe the newspaper article should have lead with that, rather than spending 90% of its paragraphs portraying this as a pro-consumer campaign before shyly dropping that little apologetic nugget in the second to last paragraph.
posted by AmberV at 4:32 AM on September 17, 2023 [8 favorites]

The US retail food industry is not immune to these Shenanigans. It’s on purpose. Democrats get blamed but the stores set the prices. Been working over time to deprogram my neighbors.
posted by Katjusa Roquette at 4:51 AM on September 17, 2023 [7 favorites]

Buyers set prices. No one can sell anything for a penny more than a customer is willing and able to pay.
posted by MattD at 5:55 AM on September 17, 2023 [1 favorite]

Great work, and exactly the kind of thing that open source is perfect for. Government+corporations say "it'll take many months and millions of dollars to figure out if we even need to help you, poor people," somebody with skills (and probably a high-paying job of their own based on those skills) is able to whip together some data journalism to shame them, other people join in to help. Bravo all around, great story, hopefully it does what it intended to and pushes prices down (and maybe changes some laws?) for Austrian consumers.
posted by clawsoon at 5:59 AM on September 17, 2023 [7 favorites]

> Buyers set prices. No one can sell anything for a penny more than a customer is willing and able to pay.

lol.
posted by bombastic lowercase pronouncements at 6:13 AM on September 17, 2023 [92 favorites]

Sellers are deciding to find out if they can become even more ridiculously rich because of how much buyers will be willing to pay to avoid starvation.
posted by clawsoon at 6:23 AM on September 17, 2023 [14 favorites]

I'd be cautious about thinking that publishing transparent price data only helps the consumer - the evidence is that it can also help the sellers coordinate pricing cycles.

There has been quite a lot of research done on petrol price cycles, where typical seller behavior involves the stronger brands with loyalty lock-ins acting first and sharply raising their prices since their customers are less price sensitive, causing other petrol stations to follow suit with a slight delay.

Then we see several weeks of sustained but slow price cuts, and we see it's the independent brands (who attract the price sensitive consumers) who lead the way in gradually cutting prices back to baseline.

This fluctuating price behavior occurs naturally, even decades ago, and doesn't require any illegal collusion - you would just observe the prices your competitors are charging in your neighbourhood, and based on your strategy (whether you're a big brand or independent) you would rationally adjust your prices against your competition. If you're an independent you'd undercut, if you're a big brand you'd lead the price rises.

Nowadays the prices are much more coordinated and it's rare for any station to be caught flat footed, because online apps publish updated prices for the entire state every hour - it's so much easier for petrol stations to just check competitor prices and adjust their pricing strategy.
posted by xdvesper at 6:24 AM on September 17, 2023 [6 favorites]

Buyers set prices. No one can sell anything for a penny more than a customer is willing and able to pay.

This is like saying "When a person ingests cyanide, they die because of a number of completely natural biological and chemical processes that are wholly unconnected with me!" at your trial for poisoning somebody.
posted by delicious-luncheon at 6:56 AM on September 17, 2023 [19 favorites]

Buyers set prices. No one can sell anything for a penny more than a customer is willing and able to pay.

"I know inflation is bad, but have you tried just not eating food?"
posted by Foosnark at 7:12 AM on September 17, 2023 [33 favorites]

Buyers set prices. No one can sell anything for a penny more than a customer is willing and able to pay.

For things with elastic demand and a competitive market, sure. But at least where I live, food prices for staples (i.e., the items you have to get week after week, not the luxuries) are pretty stable across the stores in town. More expensive at the Whole Foods (though sometimes of better quality); cheapest at Costco/Sams Club but with limited selection. All the regular grocery stores in between are very comparable in pricing.

In other words, your choice is to pay the going price, or to join the more-than-two-mile-long line of cars at the nearby foodbank on the one day a week that it is open.
posted by Dip Flash at 7:26 AM on September 17, 2023 [11 favorites]

Buyers set prices.

Bread price-fixing in Canada

‘They don’t let us’: Dollarama stores sell bread, unless there’s a Sobeys nearby

Class-Action Lawsuit Alleges Canadian Food Industry Giants Colluded To Unlawfully Manipulate The Price Of Meat [Op-Ed]

Bread price-fixing is a small part of the problem
posted by eviemath at 7:37 AM on September 17, 2023 [22 favorites]

we see several weeks of sustained but slow price cuts

Freakonomics did a short piece on gas station pricing that’s worth a listen. Their description of this pricing pattern was “rockets and feathers”. In part, it’s because individual gas station owners are buying in bulk every few days and are locked in with a load of gas that they paid last week’s price for. Their competitors around town may be buying on different days, and pricing accordingly. So they can’t always *increase* prices sufficiently if competitors are selling yesterday’s gas cheaper than today’s, but they also can’t drop prices too fast when today’s wholesale gas is cheaper than what their competitor is sitting on. Rise like a rocket to react to price increases, drop like a feather to make up your losses.

Station owners tend to insulate their customers from the ups and downs of the oil market. When crude prices go up, station owners are slow to pass on the extra cost to us at the pump. But when prices finally fall — well, they don’t pass along the savings right away either. A station owner like Sethi might keep his prices high for a while, to make up for the bad times.
posted by rh at 7:38 AM on September 17, 2023 [1 favorite]

The “buyers set prices” claim depends on a specific set of preconditions(*), including there being enough sellers to meet theoretical assumptions about competition in the economic models, demand being at least somewhat elastic, as well as lack of communication between sellers beyond just noticing each others’ prices. For most basic necessities such as food and housing, this is really an “assume a spherical cow” type situation.

(*Although Econ 101 courses rarely involve much math explicitly, what they teach tends to be a theoretical framework based on mathematical models of economic activity. Mathematical models aren’t always stated explicitly as theorems, but they all have assumptions that must hold in order for the predicted outcomes to be valid. A mathematical theorem is an if-then statement: if hypotheses [aka assumptions are true, then conclusion holds/is true. So any time you see someone making an economics claim (or applying any other mathematical model), ask “what assumptions are they relying on, and do those assumptions actually hold”. If not, you’re in the situation that computer scientists describe as garbage in-garbage out.)
posted by eviemath at 7:47 AM on September 17, 2023 [15 favorites]

Perhaps a derail, but maybe not (it shows another facet of the man and how much he is involved in social activism): Mario Zechner is also one of the two people who run "Cards for Ukraine", a charity giving shopping vouchers (cards) to Ukrainian refugees in Austria, as otherwise many of them literally go hungry in a rich country (Austria).
posted by 15L06 at 7:54 AM on September 17, 2023 [10 favorites]

Survival Lilly has info regarding the situation.
posted by JohnR at 8:34 AM on September 17, 2023

[ squats with devil fingers in front of the tombstone ]

Anyway, all essential goods, including food, healthcare, housing, utilities and connectivity should be sold by non-profits, co-ops or arms-length crown corporations. If you want to open a capitalist food shop and sell high-end stuff, go ahead, but you're not going to play games with the price of eggs, bread, milk, etc.
posted by seanmpuckett at 10:07 AM on September 17, 2023 [7 favorites]

Buyers set prices.

I've expressed a similar sentiment in simpler contexts, but here we're talking about strategies specifically designed to undermine a shopper's ability to judge what a good price is. So I see this differently.

The poster calls it "asymmetric information warfare," by which I believe he means it's the systematic creation of information asymmetry. That seems exactly right to me, and I would expect that even the hardest hearted free market booster would have to agree that's dirty pool, that's a subversion of free market principles.

Even one argued that the shoppers could, in principle, just track this stuff themselves, that is information asymmetry. Because 100,000 shoppers tracking such shenanigans individually is, in total, far, far more effort, more labor, than the store chain expends to obfuscate the prices in the first place.

I'm guessing that the websites of Austrian grocery store chains are about to become harder to scrape. That would be a continuation of the trend toward information asymmetry.
posted by Western Infidels at 10:14 AM on September 17, 2023 [8 favorites]

A very good open source success story.
posted by doctornemo at 12:03 PM on September 17, 2023 [1 favorite]

Did MattD just make a stealth Austrian school of economics joke? I choose to assume so.
posted by joeyh at 12:29 PM on September 17, 2023 [10 favorites]

The smart capitalist finds markets where the buyers *do not* set the prices.

Ford CEO was recently saying this about moving more & more to niche vehicles like the Bronco, where buyers love the car so much they're willing to fork over the dough for the privilege.

Rental housing is another such market of course, as due to physics (two apartments can't occupy the same space) and vagrancy laws enforced by The Man, each property enjoys its own little local monopoly. Somebody should make a game on that, seems like a fun topic.
posted by Heywood Mogroot III at 12:56 PM on September 17, 2023 [6 favorites]

The “buyers set prices” claim depends on a specific set of preconditions(*), including there being enough sellers to meet theoretical assumptions about competition in the economic models

In economic theory, buyers don't (directly) set prices. The marginal cost of production sets the price and is the price, because competition. All buyers do is provide a level of demand that indicates how far out on the marginal cost function the producers are.

Which is to say that the original "buyers set prices" claim is wrong or at least unhelpful. If price is higher than marginal cost, then:

(a) something has gone wrong (lack of effective competition in this context)
(b) someone is getting exploited
(c) even beyond the exploitation, human welfare is being straight-up destroyed
posted by GCU Sweet and Full of Grace at 2:02 PM on September 17, 2023 [3 favorites]

Did MattD just make a stealth Austrian school of economics joke? I choose to assume so.

I liked that MattD gave strong enough lost in the supermarket vibes that a later commenter thought it best to explain the concept of a staple food.
posted by busted_crayons at 2:50 PM on September 17, 2023 [7 favorites]

GCU Sweet and Full of Grace: In economic theory, buyers don't (directly) set prices. The marginal cost of production sets the price and is the price, because competition. All buyers do is provide a level of demand that indicates how far out on the marginal cost function the producers are.

I remember reading some papers which found that hardly any actual sellers use marginal cost theory - or any other well-supported pricing theory - to set prices. Instead, real firms typically start with rough cost-plus-profit prices, then tweak them based on guesses about how their customers will respond to price changes. It's an altogether messier process than any economic theory has so far been able to capture.

And I suppose this story is a good indication of why. Competition failed to lower prices, since competition isn't in the interest of any of the members of an oligopoly, but public shaming - a much less predictable process! - might end up doing the job.
posted by clawsoon at 4:19 PM on September 17, 2023 [5 favorites]

I'd be cautious about thinking that publishing transparent price data only helps the consumer - the evidence is that it can also help the sellers coordinate pricing cycles.

This doesn't seem like a worry in this case. The sellers have already (almost certainly) been colluding, because the data is available to them on their competitors' sites with just a little bit of elbow grease (as the dude behind this project showed vis-a-vis his own work). The only people who don't have access to transparent price data are Austrian citizens.
posted by Conrad Cornelius o'Donald o'Dell at 5:42 PM on September 17, 2023 [6 favorites]

I remember reading some papers which found that hardly any actual sellers use marginal cost theory - or any other well-supported pricing theory - to set prices

I think that, in this supermarket example, that’s fairly true- a marginal cost relationship is probably something inferred after the fact- because supermarkets don’t produce anything they sell.

However, price fixing at both the supplier and retailer level with supermarkets is a crime with a long history and plenty of examples, some recounted above. In a situation where volatility is high it would be much easier to hide evidence of price fixing. Ultimately the way that food is produced and conveyed to your table - especially in the US - has so many opportunities for rents to be sought I’m not surprised at any of this.
posted by q*ben at 5:46 PM on September 17, 2023 [2 favorites]

In the linked Mastodon thread, there's an interesting mention of how businesses can effectively accomplish what a reasonable person would call "price fixing", without the explicit communication that's typically required by law in order to establish that criminal activity has occurred, simply by using their knowledge of competitors' prices.

Basically, businesses have found themselves a very convenient loophole: as long as they don't literally send each other emails saying "hey, let's all raise the price of bread next week, fuck the proles, amirite?" they can de facto coordinate all they want. They just watch each other, and when someone raises the price, the other market participants do the same, because they know it's better to stay in lockstep than to precipitate actual competition on price between each other. This is absolutely what anti-price-fixing laws were designed to prevent, but they've just worked around the laws, and the laws haven't been updated.

And Zechner's data shows this very clearly.

The free market / libertarian / economic-theoretical response is that if market participants collude to keep prices artificially high (above the cost of production), then new sellers will be drawn in by the opportunity to undercut them. But in reality this almost never happens: the barriers to entry for something like staple foods—where there's truly huge economies of scale involved, not to mention exclusivity agreements with suppliers and the like—means that there's typically only a few suppliers for most staples (at some point in the supply chain), and by coordinating their pricing against each other they can avoid "unnecessary" competition and maintain prices that are far above what Econ 101 would tell you should happen.

Given how data like Zechner's shows things play out here in the real world, I do not think there's really any valid free-market argument against significant, direct regulation of prices and profit margins in markets that do not permit the easy entrance and exit of participants. Or put differently: if someone can't jump into the market and start competing very easily—like with a typical small-business loan—then there needs to be regulation, because the competition to make the market behave like free-market theory says it should just doesn't and isn't going to naturally exist.

Having two or three participants in a market is demonstrably insufficent to drive down and maintain prices near the cost of production, where they should be in an ideal market, and anytime someone points to a market with just a few major players and says it's competitive enough, you can probably safely assume they're a corporate tool.
posted by Kadin2048 at 7:08 PM on September 17, 2023 [16 favorites]

Buyers set prices. No one can sell anything for a penny more than a customer is willing and able to pay.

'The cost of living started my shoplifting': Why stealing goods is on the rise
posted by ChurchHatesTucker at 7:17 PM on September 17, 2023 [8 favorites]

Supply is the amount of dollars in my pocket. Demand of those dollars is set by a corporation's knowledge of the total amount of dollars in my pocket.
posted by UN at 1:11 AM on September 18, 2023 [3 favorites]

Buyers set prices. No one can sell anything for a penny more than a customer is willing and able to pay.

unless it's health care, where they often don't tell you how much it's going to cost until you get the bill

and bankruptcy, by definition, is a case of a customer not being able to pay
posted by pyramid termite at 3:59 AM on September 18, 2023 [4 favorites]

The market is not perfect: companies certainly have market power. But the average grocery store profit margins is 2 percent, and they have to make some profit, so even if that market power among grocery stores allows them to raise prices, the effect on prices paid by consumers is quite small.

In contrast, the profit margin for food manufacturers is on the order of 10 percent. Based on the price differentials between name brands and store brands, and between the prices at Safeway and Aldi, for example, I'd guess that a lot of that profit is driven by consumer preferences for the name brands, but please let me know if I'm wrong.
posted by Mr.Know-it-some at 8:32 AM on September 18, 2023

https://www.kingswood-capital.com/the-save-mart-companies-announces-acquisition-by-kingswood-capital-management
posted by Heywood Mogroot III at 9:09 AM on September 18, 2023

It's true that grocery stores are a low-margin business. But that ~2% is over the entire operating cost of the store, not the just the cost of goods. Typical grocery markups on individual products are between 10-20%, with gross margins on individual products being 20-50%.

Overhead costs swing wildly, which means that to hit that 2% margin, the actual markup on products can vary wildly from store to store. We all know this through comparison shopping. For many people food is a major proportion of their household budget, so a 5-10% average increase over a short period of time on something they require to survive can be the thing that pushes them into poverty.

It's obviously systematic. In addition to food conglomerates and grocery chains, business real estate is (as always) part of the problem. But I'm not shedding too many tears for poor ol' Albertsons.
posted by q*ben at 9:12 AM on September 18, 2023 [3 favorites]

But the average grocery store profit margins is 2 percent

Is that currently true in Austria?
posted by clawsoon at 12:59 PM on September 18, 2023 [2 favorites]

But the average grocery store profit margins is 2 percent

Is that currently true in Austria?

According to the Austrian Chamber of Commerce the average profit margin is currently 1 percent

Inflation rate in Austria in August 2023 was 7.5 percent
posted by 15L06 at 3:45 AM on September 19, 2023

Basically, if you're buying a kilo of chicken for about $4.00, it would have cost the supermarket $3.96 in cost to deliver the product to you (cost of product + overheads + salaries) leaving $0.04 as profit. Out of that profit, they end up paying $0.01 or $0.02 in various taxes - corporate taxes, payroll taxes, etc. And then $0.02 gets returned to the shareholders out of the $4.00 as after-tax profits. Perhaps if the supermarket were a little less greedy we'd be paying $3.99 instead of $4.00 for chicken. Such tragedy.
posted by xdvesper at 5:05 AM on September 19, 2023 [1 favorite]

yeah no. "cost of goods + overheads + salaries" is where creative accounting comes into play. overheads like leasing the building from the grocery store's parent company that's a real estate conglomerate. paying franchise and advertising fees to the brand holder that's owned by the parent company. the brand's no-name products that skim another layer of profit before the food even hits the shelf. distribution, warehouse and transportation services provided by another company owned by the parent. anyone saying grocery stores are a low margin business doesn't understand the business model.
posted by seanmpuckett at 5:23 AM on September 19, 2023 [5 favorites]

According to the Austrian Chamber of Commerce the average profit margin is currently 1 percent

It looks like that's based on 2010-2020 data, though - maybe up to 2022? - and not the current year? The graphs in the OP, and especially its discussion of how much more grocery prices have risen in Austria compared to Germany, seem to mostly be focused on 2023.
posted by clawsoon at 5:32 AM on September 19, 2023 [1 favorite]

yeah no. "cost of goods + overheads + salaries" is where creative accounting comes into play.

Seriously, statements like these are like flat earthers or people who believe the moon landing was faked.

Companies can lie to their customers, and they can lie to the government, but the far greater sin and one they rarely get away with is lying to the shareholders. The parent company is the one that has to be listed on the stock market and they have to report total profits - like Alphabet or Meta does as the parent company, there is no way for Facebook or Google to hide their profits from their shareholders. They can hide away profits from the government to avoid tax, by off-shoring their brand assets in Ireland or whatever, but they can't hide it from their shareholders because everything is reported at the group level.

As a controlling entity their parent will be the one to report group profits. If it's NOT a controlling entity, then the shareholders will simply direct the CEO they appointed to cut out the "profit" making entity - whether it's some real estate holding firm or logistics subsidiary or no-name product - and keep the profits for themselves by contracting with someone else in the market. The shareholders would be idiots to only accept 1% profit for themselves and allow some unrelated entity to leech a 10% profit off them. If a private company buys a public company, the public company gets delisted, so that's not even an option for hiding this information.

There are literally dozens of very well resourced and financed firms whose sole purpose is to pore through the public financial statements and analyze it for any misbehavior that could indicate the company is being less than truthful to its shareholders, for example if the company is doing something like funneling profits to an unrelated entity. That's when they literally go to prison, like the management of FTX...

Literally all finance analysts and statistics would agree that groceries are one of the lowest net margin industries, and there's zero evidence to suggest that it's somehow the one and only industry that successfully hides their profits versus every other industry that exists.

Yes, you can argue that they make up for the low net margin by doing high volume, so their return on equity is comparable versus other industries. So their low net margin isn't their incompetence or their generosity, it's simply the nature of their industry, if they earned higher net margin, their ROE would skyrocket, and attract more entrants. Their competition isn't just limited to other mega conglomerates - they experience competition from the local ethnic green grocer and butcher in the same ecosystem.
posted by xdvesper at 7:09 AM on September 20, 2023 [1 favorite]

That's a lot of words attempting to refute how George Weston Ltd (which owns Loblaw Companies, which owns easily a dozen chain grocers across Canada among other things, and also owns an REIT which owns massive amounts of retail and commercial property that is also leased to those grocers) is one of the largest and most profitable businesses in Canada and its owners the Weston family one of its richest dynasties. And this pattern is repeated amongst the other major grocery chains in Canada, with their holding companies of holding companies and real estate trusts. So, whatever. Your comment assumes facts not in evidence.
posted by seanmpuckett at 7:41 AM on September 20, 2023

True, Loblow does not have a profit of only 2 percent. It has a profit of 3.5 percent.

Sure, there are problems with market concentration, and tax rates should be higher, and so on. But addressing those problems wouldn't lower average grocery prices by more than a couple of percent.
posted by Mr.Know-it-some at 9:25 AM on September 20, 2023

Grocery chains in Germany, some or all of which operate in Austria as well, are in the top 10 corporations with the highest revenue in the country, depending on who's counting. They're up there with Volkswagen, Mercedes-Benz, Adidas and so on.

Even if they make relatively low profit per item, unlike, say, Apple or Volkswagen, they sell a lot of units every second of every day. People need to eat and drink.

These corporations and their owners are extremely obscenely wealthy.
posted by UN at 8:20 AM on September 21, 2023