Did Big Potato collude to keep tater tots expensive? One grocery store thinks so

Four of the companies that control most of the country’s frozen-potato supply have been accused of brokering backdoor deals to keep their products expensive.

In a lawsuit filed last week, a Pennsylvania-based small grocery chain, Redner’s Markets, said a small group of companies that sell products like hash browns and tater tots colluded to artificially inflate prices starting in 2021. These companies — Cavendish Farms, Lamb Weston, McCain Foods, and the JR Simplot Company — control nearly all of the $68 billion frozen-potato market.

It’s true that the price of frozen potato products has skyrocketed and stayed high relative to other products, according to the Bureau of Labor Statistics’ Producer Price Index.

This is how the scheme went down, Redner’s alleges: the potato processors saw their costs shoot up in 2021, so they rose prices, but in 2022 when their costs started coming down, they all agreed to keep their prices high and pocket the wider margin.

Lamb Weston is the only company from the group that is publicly traded. As such, it’s the only one that allows us a peek under the hood. 

Looking at their financials, it’s clear that there was a shift after the pandemic, which is true for most companies. Its profit margins declined in 2020, 2021, and 2022. But after that, they jumped back up to over 25%, just over where they were before the pandemic. 

The company has said that it’s faced rising costs of production — the raw potatoes and labor are more expensive than they used to be. Their costs did go up, and so did their sales.

Lamb Weston’s financial results alone are by no means a clear indication whether price fixing or price gouging is taking place or not. But on its face, at least for this specific company, there doesn’t seem to be a smoking gun.

In a statement to Sherwood, a Lamb Weston spokesperson said they “believe the claims are without merit and intend to vigorously defend our position.” Cavendish Farms, McCain Foods, and the JR Simplot Company did not immediately respond to requests for comment.