The heads of Canada’s three biggest grocery chains faced blunt questions at a committee meeting in Parliament over food inflation.
MPs questioned the executives over what they claimed were record profits, while the executives responded their profit margins have not changed—in fact in some cases have dropped.
“We have families going into your stores, looking at the price of items … and putting them back because they can’t afford them,” said NDP Leader Jagmeet Singh. “And they look at you and they see you making record profits. How can you justify that when families are struggling to put food on the table for their kids?”
Galen Weston, president of Loblaw Companies, which owns Superstore, Extra Foods, No Frills, and others, said that while the numbers may look big, margins are slim.
“The numbers are very large, but it still translates right down to the bottom line at $1 per $25 of groceries,” Weston said. “Our growth in profits in 2022 is 25 times lower than the unprecedented increases in costs that are being faced by the industry and by the world.”
Singh kept pushing.
“Your company is making $1 million a day in excess profits,” he said. “No one feels sorry for your profit margin when you’re making a million dollars … in excess profits a day.”
Weston responded that the industry needs some profit margin.
“If we didn’t raise retail prices, as costs went up … the companies that we operate would disappear almost instantly,” he said. “One hundred percent of the total profit of the industry could go into lower food prices and the price of a grocery basket for that customer who I spoke to would still be $24 [instead of $25].”
The cost of groceries jumped by close to 10 percent in 2022—the biggest increase in 40 years. MPs on the Agriculture and Agri-Food committee are trying to come up with a report to tackle the issue.
But the grocery chain executives said the factors driving prices are beyond their control.
“Every single input cost you could have in business has risen over the last let’s say 17 or 18 months, I couldn’t find anything that’s gone down,” said Michael Medline, CEO of Empire, which runs Sobeys, Safeway, and FreshC0.
‘Oligopoly’
Conservative MP Lianne Rood accused the chains of running an “oligopoly.”“You use this power to nickel and dime farmers and wholesalers to the tune of hundreds of thousands of dollars for many, with fines, chargebacks, and exorbitant fees for the privilege of selling their food to your stores,” she said.
Medline responded he is in favour of a grocery supply code of conduct “to ensure fair practices for all participants in our food supply chain.”
He also said the three biggest food retailers only control about 47 percent of the Canadian market.
“We compete against some of the toughest food retailers in the world including Walmart, Amazon, and Costco,” he said.
“That does not sound like an oligopoly to me,” he said, adding their profits margins are “paper-thin” at around 2.5 percent.
The executives pointed out that food inflation in Canada is actually the third lowest in the Group of Seven (G-7).
“Canada is faring better than most of the G-7 countries,” said Eric La Fleche, CEO of Metro, which runs stores in Quebec, Ontario, and New Brunswick. “Our retail prices do not reflect the full effect of inflation because we too have absorbed some of the cost increases.”
Liberal MP Leah Taylor Roy questioned why some price freezes were dropped, along with the extra “hero pay” for staff during the pandemic.
“I would think at these times that you could be reinvesting profits in different ways that might benefit Canadians,” she said. “So I’m wondering how these complaints … in the face of your own profits can be reconciled with those facts and what you can do to address those concerns.”
Weston replied that they are maintaining their efforts to keep prices low, but in different ways.
“So we took that investment, part of that investment, and are reinvesting it in lower prices … so we’re beginning to see key items actually going backwards,” Weston said.
Some Conservative MPs also brought up federal policies, like the carbon tax.
“Previous witnesses have said … part of the reason for food inflation is inflationary, spending, lack of fiscal discipline, and uncompetitive tax regime like the carbon tax,” said MP John Barlow.
But the executives were reluctant to pin the blame on any one thing.
“There’s no question that input costs for producers are going up, way up over the last several months,” said La Fleche. “I don’t think it’s for us to comment on which government policies have had an impact on those inputs,” he said.
At the end of the meeting, Liberal MP Ryan Turnbull moved that the committee also ask the chief executives of Costco Canada and Walmart to testify. It received unanimous support.
