Commentary
People prefer to see simple, quick solutions to problems when they encounter them. Unfortunately, most problems are complex and take time to address.
Increasing food costs are pressuring many Canadians, but there’s no simple solution on the horizon. Many people are focusing their ire on retail grocers over the problem, but their anger is misguided and non-productive. The attempt to create a national boycott of Loblaw stores for the month of May will accomplish nothing at best, or lead to higher grocery prices at worst.
The myth that retail grocery chains are somehow gouging Canadians on pricing just won’t go away. It doesn’t help when politicians like NDP Leader Jagmeet Singh tries to coin the term “greedflation” when speaking of grocers, or
legacy media outlets breathlessly report on how Loblaw has seen a 4.5 percent increase in revenue while forgetting to mention the profit margin is a
meagre 3.4 percent. It’s hard to understand what boycotters feel they may accomplish.
If Loblaw decided to cut prices to the point where they were at a dangerously low 1 percent profit margin, the savings seen by shoppers would be marginal at best. Meanwhile, investors would likely dump stock, and
shareholders like the Canada Pension Plan would see a reduced return on their investment. Who wins in that scenario?
While enraged social media commentators accuse Loblaw of being in a monopoly position, that’s not true at all. Loblaw is the biggest player on the block, but still only makes up
29 percent of the grocery market share in Canada. There are only five major players in the market, but they are highly competitive. Rest assured, Walmart would happily undercut Superstore’s prices if indeed Superstore was gouging. In reality, both stores operate on slim margins and don’t have much room to move on prices without going into a loss position.
So why is so much vitriol directed at Loblaw in particular?
For one, people naturally try to blame the biggest player on the block. They assume that the company is using its size to get away with overcharging for groceries. In reality, the company uses its size to take advantage of economies of scale to keep prices low. Loblaw stores usually have the lowest grocery prices, making it ironic that they have become the target of boycott initiatives.
Another reason Loblaw is in the cross-hairs is they have a name and face attached to them.
Galen Weston Jr. is the president of Loblaw Companies Ltd. and he provides a convenient villain. People who indulge in the politics of envy love to find wealthy heirs to portray as Scrooge McDuck figures who swim in money bins rather than sharing the wealth. The other grocers are more faceless. Even if Weston took no salary, it wouldn’t amount to more than pennies on a person’s grocery bill, but that doesn’t stop others from trying to imply he is robbing consumers.
The attack on Canadian grocers has been going on for quite some time. The Trudeau government asked for the Competition Bureau to investigate grocers in hopes of exposing a ring of collusion and price-fixing. Instead, the bureau’s report called the profits earned by grocers modest and
suggested more competition in the industry could help ease some of the pressures.
Now this is where the actions of the boycotters and politicians attacking Canadian grocers may lead to higher grocery prices for Canadians.
The federal government has been
courting and pitching Canada to large foreign grocery chains in hopes of increasing competition in the market. So far though, no grocers have shown interest in setting up shop in Canada.
Why would a foreign corporation risk investing in a country that villainizes its existing grocers for operating on a 3.4 percent profit margin?
Why would a CEO from another country want to subject himself or herself to the kind of abuse Galen Weston is enduring for operating a successful business?
Foreign investors can get a safer and larger return by putting funds in Guaranteed Investment Certificates. They won’t consider coming to Canada until a business-friendly climate develops.
The Conservatives have been trying to paint the elimination of carbon taxes as a magic bullet to reduce grocery prices. While the tax contributes to higher bills, eliminating it will only offer modest savings. Carbon taxes are just one of many factors contributing to high prices.
Liberals and Conservatives want to offer simple solutions to consumers when there are none. That’s the nature of politics. Discussions on the speed of population growth, business taxes, supply chains, zoning, and government deficit-induced inflation need to be had, which will take time and aren’t exciting. The discussions must be had nonetheless.
Consumers won’t be seeing lower grocery prices any time soon, unfortunately. No amount of boycotting or political theatrics from any party will change that reality.
Views expressed in this article are opinions of the author and do not necessarily reflect the views of The Epoch Times.
