With all the talk about the Hockey Canada scandal, not many people noticed that Ottawa decided to look into food prices and what they say is abuse by large grocery chains.
In the coming weeks, the problem will be looked at by the Parliamentary Standing Committee on Agriculture and the members of the Committee.
First, we must be happy with what Ottawa has decided. Even though Canada has the third lowest food inflation rate among the G7 countries right now, after Japan and France, food inflation has been higher than overall inflation in Canada for 13 months in a row. Almost every time you go to the grocery store, it costs you more money.
But only looking into retail would be a narrow view, and the committee seems to agree. The study will look at the whole chain because Canadians deserve to know how the food industry as a whole is doing. From the farm to the table, getting food to people is a complicated process that involves several companies at once. Many people say that grocery stores like Metro, Loblaws, and Sobeys take advantage of the system and charge too much. But public information shows that this is not the case at all.
When you compare the profit margins of the three biggest stores—Loblaws, Sobeys, and Metro—over the last five years, it’s easy to see that their financial results aren’t that great. So, at the end of each company’s fiscal year in 2021, Loblaws, Empire-Sobeys, and Metro all had profit margins of 3.7%, 2.7%, and 4.5%, respectively.
It’s about time Ottawa investigates food prices:
For the last five years, returns have been about the same. During most of the five years, food prices went up faster than yields or at the same rate. In other words, compared to the rise in the cost of living, these chains didn’t do much better. So far, the year 2022 doesn’t look too different.
Obviously, the claims of record profits give fuel to the accusations of the last few months. A 2% or 3% increase in money does not look the same as it did five years ago. There are more of them. Math is easy. Costs are also going up, but so are incomes. Even though the amounts are going up, the percentages don’t change.
Even so, opinions stay the same. Almost 80% of Canadians say that the system is being abused, and they are not completely wrong to think this.
In recent years, the business world has let people down, especially with the “bread cartel” story. Even though the current accusations aren’t true, they are still fair.
Ottawa will be looking into the whole chain, from production to retail, as well as wages, so this won’t be easy. Realistically, there aren’t many hopes that the committee will find anything.
In the food industry, there are a lot of family businesses and companies that are very careful with information about their competitors. Some companies buy and sell goods without ever seeing or touching food. It will be hard to get access to that data.
But the committee can’t just talk about how grocery prices are too high. If there is abuse, it might be farther upstream.
Some macroeconomic factors, like the shaky supply chains caused by the pandemic, the lack of workers in the sector, and the invasion of Ukraine, can be used to explain why prices have gone up.
But some of the price increases we see at the grocery store are hard to explain, especially at the meat counter, in the dairy section, and in the fish and seafood section. Prices are going up in the bakery aisle as well.
In short, while the investigation is going on, the Parliamentary Committee must stick to a sensible and good line of thinking and not get caught up in the imagination and the extreme. If consumers have a choice and companies don’t try to control the market, selling a product at an outrageous price doesn’t have to be a scam.
Price increases are caused by more than just rising costs, though. Price and demand changes are also important parts of how food is distributed. Prices will be affected by competition and the markets. Also, the committee needs to look into this.
It won’t be easy for the committee to pick out the differences between certain bad business practices and good ones. But it is worth the effort so that more Canadians can understand how our food supply chains work.
Sylvain Charlebois is also a professor of food distribution and policy at Dalhousie University. He is also the senior director of the agri-food analytics lab.
This article was written by or for a columnist who was hired outside of Castanet. It does not always represent the views of Castanet.
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