The biggest food companies in the world make a profit of 23 billion euros, while warning of further price increases. They paid their shareholders almost 17 billion euros this year. Meanwhile, rising food prices make it difficult for desperate families to buy enough food.
‘Nestlé’, ‘Unilever’, ‘Associated British Foods’, ‘Mondelez’ and ‘Archer-Daniels-Midland Company’ (ADM) have made 23 billion euros in profits over the course of a year, while the average prices of their food is all increased. Four of these five multinationals – which together own thousands of popular brands – have also suggested that consumers should expect further price increases. Only ADM has not done this.
The companies’ profits would be more than enough to cover twice the funding shortfall of around 11 billion euros faced by the UN’s World Food Program (WFP). WFP aims to provide food to 160 million people living in poverty by the end of the year. According to the WFP, buying food today will cost 44% more than in 2020.
The food business bonanza comes as the number of people in the United Kingdom (UK) relying on food banks has risen by 40% since April this year, according to the Trussell Trust. The charity, which supports food banks across the UK, has warned it can no longer rely on donations to meet rising demand for emergency food parcels.
Frédéric Mousseau, an economist who has worked for major international aid organizations such as Oxfam and ‘Action Against Hunger’, argues: “How can we accept that a handful of companies are making so much profit when there are billions of people already struggling to survive ?”
In the UK, food prices have risen by an average of 16% this year. The costs of a number of basic products – such as bread and milk – have increased by a third. Prices of vegetable oil and pasta have risen by more than 60% – the biggest price increase among the cheap foods tracked by the Bureau of National Statistics.
The UK’s largest vegetable oil producer, Edible Oils Limited, is jointly owned by US grain giant Archer-Daniels-Midland and Princes, a UK subsidiary of Mitsubishi Corporation. ADM has increased its profits by 48% this year and paid out the equivalent of €1.7 billion to its shareholders in dividends and share buybacks in the first half of this year alone.
Associated British Foods (ABF), Britain’s most profitable food company, has also paid out more than GBP 500 million to its shareholders. ABF chief executive George G. Weston – who will receive a salary of £2.2m this year – told investors at the annual accounts presentation: “Revenues benefited from the price increases and the operating result is solid. We have had to recover a huge amount of input costs […] and we did that very well. But we are not done yet.”
Some food giants claim they have tried to soften the blow for consumers as they pass on input costs. When Nestlé chief executive Mark Schneider announced half-year results in July, he said he “has made it a point to act responsibly with our price increases”. Nestlé reported a half-year profit of more than €5 billion, down 11% compared to the same period last year. But the company has paid out more than 9 billion euros to shareholders. At the same time, it raised the prices of its products – including top-selling baby food – by 7.5%.
“These companies are very good at spouting rhetoric that doesn’t have a lot of substance,” said Philip Howard, a professor in the Department of Community Sustainability at Michigan State University. “They talk about balance, but when there’s a choice between increasing their power and ‘doing the right thing,’ increased power will always win. That’s what shareholders demand.”
Unilever, an Anglo-Dutch multinational that also makes household and beauty products, has made almost 5 billion euros in profit this year, up 4% on last year. The company informed its shareholders that it has raised its prices by 12% to cover rising costs. At the same time, it paid out 1.5 billion euros to its shareholders.
US snack company Mondelez reported a 10% rise in profits this year, generating almost €8bn. The company has paid out €3.2 billion to shareholders in share buybacks and dividends, while increasing its prices by 11% last quarter.
“The shareholders who own these companies expect growth and a return on their investment every year. That may be understandable for companies that sell telephones or televisions, but food is not a common commodity. Everyone depends on it to survive and this company’s need for ever-growing profits poses existential questions to humanity,” Mousseau said.
Supply chain disruptions caused by the pandemic, the war in Ukraine, rising fuel costs and the impact of heat waves on crops have all contributed to the increased costs of food production and processing. But food experts say “excessive resource speculation” rather than shortages is the main driver of rising costs.
This translated and shortened article has previously appeared on OpenDemocracy.