Now that the annual numbers of the major food companies are known, it seems they have not been harmed by rising food prices. In fact, its profits have increased and it has made its shareholders look like the winners of inflation. In recent years, they have received large payouts in the form of dividends.
Last week’s annual figures show food companies making billions of dollars in profits once again. Ahold Delhaize made a profit of around 2.5 billion euros, Heineken 2.7 billion euros, Unilever 8.3 billion euros and American food manufacturer Procter & Gamble around 12.8 billion euros. Nestlé’s annual figures are still pending.
Earnings gains can also be due to factors unrelated to food prices, such as a stronger dollar (according to Ahold Delhaize) or the sale of business units (as with Unilever).
However, last year’s increased prices appear to be largely consumer driven. What about this?
“I find it interesting that companies use periods of inflation to push prices even higher, because a lot of things are vague and unnoticeable to consumers,” says Rens van Tilburg, head of the Sustainable Finance Lab.
Van Tilburg points out that the production costs of a company like Shell are fixed and the price of oil is determined in the world market. “But it’s incredible that a company like Unilever can do that.
The Unilever boss, who previously said the company would only roll over 75 percent of the high costs, doesn’t think so. Ahold Delhaize points out that profit margins have fallen by 0.1 percent worldwide and further in Europe.
“Number One Shareholders”
Van Tilburg worries that big companies are making higher profits at the expense of consumers. “Ahold says the customer comes first, but you don’t see it in the numbers. Shareholders come first. That’s a bad thing because there’s no social reason for them to do that.”
According to Van Tilburg, the Rhine capitalist model has long been the norm in the Netherlands. The aim is to find a balance between the interests of shareholders, employees, consumers and society.
But since the 1990s, Van Tilburg has seen large Dutch companies move to the Anglo-Saxon model, where the market sets priorities. According to the director, this is also quickly making money.
“These MNCs could choose, for example, to cut price increases or increase their employees’ wages, but they choose themselves first, then their shareholders.”
According to Van Tilburg, the rules need to be tightened in order to make value again the most important pillar for society. “A group of lawyers has tried to make this clearer in the law before, but has failed.”
spread trust
Shareholders need not expect higher dividend payouts, according to Joost Schmets of Vereniging van Effectenbezitters. “You give yourself confidence as a company: things are going well here, we don’t need the investment anymore and we give the money back.”
According to Schmets, shareholders do not benefit either if consumers pay too high prices because “then they go to the competitor and that is ultimately not good for the shareholder.”
Not only are companies increasing dividends, they are also buying back their own shares. Shareholders also benefit directly, as the value is divided into fewer shares.
Ahold Delhaize will buy back its shares for 1 billion euros this year. Unilever announced that it would buy back shares for 3 billion euros in 2022.
Source: NOS
Roy Brown is a renowned economist and author at The Nation View. He has a deep understanding of the global economy and its intricacies. He writes about a wide range of economic topics, including monetary policy, fiscal policy, international trade, and labor markets.
