"No substantiated evidence" of grocery profiteering in Canada, says prominent food researcher
A Canadian food distribution researcher says the “profiteering debate” regarding the country’s largest grocery retailers should be “put to rest.”
While addressing the Parliamentary Committee on Agriculture earlier this week, Sylvain Charlebois — director of the agri-food analytics lab at Dalhousie University — said that “there is no substantiated evidence of profiteering within the food retail industry.”
Had the privilege of returning to the Parliamentary Committee on Agriculture to testify this week in Ottawa, where I highlighted three crucial points.
1) Profiteering is not the primary issue; it's price volatility that demands our attention.
2) We must address the industry's… pic.twitter.com/NtzEPugGJb
— The Food Professor (@FoodProfessor) February 6, 2024
“It is important to know that gross margins for all three major grocers have remained constant for over five years,” he explained to the committee.
Charlebois’s comments come after other reports have indicated that Canada’s largest grocers are profiting from high grocery prices.
A 2022 Toronto Star investigation suggested that major grocery chains in the country were increasing their prices faster than necessary and seeing more profit amid rapid inflation.
A December 2023 report from the Centre for Future Work noted that while supermarket executives — such as Galen Weston Jr. of Loblaw Companies — have claimed that they haven’t profited from food price inflation, that isn’t quite the case.
That report cited industry-wide financial food retail data from Statistics Canada, which indicates that food retailers earn more than double the retail profits since prepandemic norms, and their earnings continue to grow.
The data also indicated that food retailers earned a whopping $4.6 billion up to October 2023 and were expected to exceed $6 billion in profits at the end of last year.
This stance on grocery profiteering isn’t new
Charlebois’ stance on grocery profiteering is something he has spoken openly about in the past.
He referenced the Centre for Future Work report in an op-ed in December for Retail Insider. He argued that using figures from corporate financial statements instead of those provided by Statistics Canada would be “more reliable.”
“Net profits are not a suitable metric to consider unless the intention is to sensationalize the issue of profiteering,” he wrote.
“To assess whether a grocery chain is indeed profiteering, one can look at gross profit margins, calculated as revenues minus the cost of goods sold. It’s worth mentioning that the gross profit margins for our major grocers have remained relatively stable over the past five years, based on data from their financial reports.”
Other issues must be prioritized to lower grocery prices
During the committee hearing, Charlebois outlined several prominent problems he and his research team think should be prioritized to lower grocery costs.
The first addresses the “prevailing culture of copycatting price coordination and discount alignment with the grocery sector.”
Charlebois highlighted the recent Loblaw decision to end its 50% discount on nearly-expired items as an example, as the company justified the move by claiming it needed to align discounts with competitors.
After facing severe public backlash, Loblaw quickly reinstated the half-off discount program.
Another issue is with the three-month blackout period, where grocers request retailers to freeze prices, which also directly impacts grocery costs.
Charlebois told the committee the practice “shouldn’t exist” altogether.
Last month, the CEO of Metro acknowledged that the price for some goods across its stores nationwide will climb in the coming weeks due to the end of the price freeze.
This leads to “increased price volatility, which is contrary to the desired outcome for Canadians,” added the Dalhousie researcher.
He also said that Canada’s Competition Bureau must take more action to monitor anti-competitive behaviour.
Loblaw, Walmart still haven’t signed Grocery Code of Conduct
Charlebois stressed that the industry-led Grocery Code of Conduct is one of the most important measures the federal government and the country’s grocers need to move forward with.
The code of conduct aims to enhance “transparency, predictability, and fair dealing” in the grocery business.
While it looked like the code was close to being implemented by the end of 2023, there have been delays.
Bloc Quebecois MP Yves Perron, also the AGRIStanding Committee on Agriculture Vice President, noted during the meeting that this is due to Walmart and Loblaw delaying signing on and agreeing to the code’s term.
“The code will not work without the mandatory participation of all the players in the industry,” added Charlebois.
“The implementation of the code of conduct should be viewed as a priority if this committee is serious about achieving long-term food price stability.”
Carbon tax talks
Several other topics were discussed during the two-hour committee meeting, including the impact of climate change on food supply and farming and the carbon tax.
Speaking about the carbon tax, Charlebois noted that while he and his research team can’t correlate the tax’s pricing with food retail prices, they are concerned about how it impacts competitiveness.
“Because the financial burden put on farmers, on processing, on retailers, eventually the industry’s competitiveness could be compromised over time, compared to what we see in the United States,” he said.
He did acknowledge, however, the multitude of factors that directly impact food prices.
“Consumer behaviour can impact food prices; the weather can impact food prices. So it’s very difficult to correlate retail prices with policies such as the carbon tax.”
“We don’t know exactly how the carbon tax will impact the industry’s competitiveness over time,” he added. “We just don’t know.”
The federal government has pledged to take action on Canada’s high grocery prices and is working to create more avenues for competition.
However, these changes are coming at a slower pace, as many Canadians are still struggling to afford the basics.
A bill that aims to lower grocery prices in Canada and “crackdown on corporate greed” passed its second reading in the House of Commons.
Bill C-352 — titled “An Act to Amend the Competition Act and the Competition Tribunal Act”— was introduced by NDP leader Jagmeet Singh last September.
The bill still needs to move to committee hearings before it goes to a third and final reading in the House of Commons.
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