August 30, 2024 – This is a huge and complex topic. I venture into this hot topic without any class-room economics knowledge; only the hard knocks of owning small businesses. One of these businesses is AquaNew that manufactures Watt-Ahh bottled water. It is highly supply driven, needs reliable and speedy production lines, is heavy weight for distribution and being in the beverage industry, one of the most competitive business sectors. Rob and I are devoted to this company, our team and its customers and if you ever talked with either one of us, you know that we are very passionate about Watt-Ahh itself and how it helps others (and us).
We are also driven in maintaining the highest quality standards for our product. We do not accept any compromise on the quality of packaging, if at all possible and available, even when shipping boxes, clean plastic bottles, labels and the cost of water purification have dramatically increased. Shipping a heavy product automatically increases by the carrier at least 6% each year (ouch! particularly when Watt-Ahh is shipped from Florida to the West Coast). AquaNew also supports the livelihood of at least six independent entrepreneurs at a well-above market hourly rate (plus a profit-sharing schedule) along with supporting a number of supply and service vendors.
Businesses can flourish and product quality is sustained when competing with other businesses. Artificial price controls potentially proposed by the U.S. Federal Government* could backfire with unintentional consequences of shuttering small businesses, eliminating competition (less product choices for the consumer) and even reduction in product quality to meet the fixed pricing. It also could have a cooling effect of launching new product innovations (like the Watt-Ahh market experiment years ago) due to unpredictable regulatory and legal risks.
We all share in the sticker-shock pricing these days when shopping for food and even over-the-counter pain-relief medications and shampoo. Every customer is paying for raising packaging costs and transport of the products to grocery shelves. If I had a magic wand and can lower at least one of these costs, I would wave it at distribution. The Federal government heavily regulates freight movement by limiting driver times. For the long cross-country hauls, a freight company pays labor and benefits for two-tandem drivers in the same cab such that one gets her 12 consecutive hours of rest before going back on the driver’s wheel. Time delays from clogged and inefficient highways continue to cause on-going increases in shipping quotes as well as raising fuel and insurance costs. Additionally, there is a limited alternative for shipping individual parcels door-to-door and the lack of competition and raising labor costs continue to increase shipping costs ultimately paid by the consumer.
Highway, rail and airport inefficiencies in handling freight transport should be a priority before any consideration of imposing Federal price controls on grocery stores. Instead, our taxes should be funneled into infrastructure improvements nationwide. This is my opinion and we certainly welcome any constructive ideas to ease food and beverage prices while maintaining and improving product quality at the same time of allowing good ole’ American ingenuity and competition to flourish in a free market.
Conquering “Greedflation”
In the 1970’s, freezing prices mandated by U.S. Executive Order caused long lines waiting at gas stations to refuel cars. The term “Greedflation” has been used to accuse food companies of setting “grossly excessive prices”. One existing legislative proposal sponsored by at least one U.S. Senator would authorize the U.S. Federal Trade Commission (FTC) to identify excessive pricing with a penalty of up to 5% of annual revenue of the violating company. There seems to be a lack of strong evidence for “Greedflation” and raising prices are more likely the result of inflation in fuel, distribution and supply/ingredient costs. The limited experience of nationwide price controls have been a miserable experience for consumers in the past with product shortages, long lines and even soaring pricing after the controls are lifted.
* Not including any existing price gouging laws adopted by individual States that may illegally occur in a post-disaster.