As an “unlikely alliance” between Canada’s independent grocers and the country’s three largest chains is forming, a Liberal MP is arguing that shoppers need more competition amid soaring food prices and accusations that grocery stores are at fault for higher food inflation.
Galen Weston, CEO of Loblaws, testified before a parliamentary committee on Wednesday that “reasonable profitability is an important part of operating a successful business,” as the country’s three largest chains insisted that they are not profiting off soaring food inflation and are doing everything they can to keep prices to a minimum.
Weston appeared alongside Eric La Fleche, chief executive of Metro Inc., and Michael Medline, chief executive of Empire Co., which operates chains including Sobeys, Safeway and FreshCo.
All three companies and their executives have been under scrutiny as Statistics Canada reported that prices for food purchased from the grocery store were again up 11.4 per cent in January compared with a year ago.
But in a now-viral clip-on Twitter uploaded by Chelsea Nash, deputy editor with The Hill Times, London North Centre Liberal MP Peter Fragiskatos can be seen asking Weston about why he wouldn’t reintroduce the “hero pay” which would give workers a $2 raise and was first seen implemented around the start of the COVID-19 pandemic.
Citing rising costs, Weston responds in the clip by saying it doesn’t make sense, saying that his company has been raising wages for the last five years and is now up an estimated $550 million.
“He says that for every $25 that people spend at his grocery stores $1 of profit is earned,” Fragiskatos told Global News. “So, if you do the math, that’s a four per cent profit margin, which is, as I understand it, according to economists that specialized in this area, well in line with where they’ve been in the past.”
According to a Dalhousie University report, all three companies posted higher profits in the first half of 2022 compared with their average performance over the past five years.
Grocers argued that while their profits may have increased, their food margins have remained flat, saying that higher margins come from pharmacy, cosmetic as well as apparel sales.
Fragiskatos said that most of what he’s hearing from Welton, and other grocery chain CEOs, is “throwing cold water on the gouging argument.”
“I still want to delve in and understand it a little more, but I’m not convinced that grocery stores are gouging,” he said. “However, that doesn’t mean that they’re not making record profits. Their expenses are high — I understand that — but still, profits are profits.”
Fragiskatos said that he also asked Weston for his thoughts on how foreign grocery chains could provide more competition in Canada, something the MP sees as a way to mitigate rising food prices.
“That wasn’t captured on video but that’s where we had our strongest back and forth because he said there is a lot of competition already in Canada. Well, on the face of it, perhaps, but then you have to delve in and recognize that there are three companies that have all these subsidiaries so it’s three companies that, as I say, run the system,” he said.
Fragiskatos stressed that “Canada needs more competition.”
“That’s something I want to understand a little bit more from a foreign investment perspective,” he said. “Whether or not that’s possible, I certainly hope the Competition Bureau wrestles with the idea as well. I know they will, and so I’ll be following this throughout because we just need more competition.”
As for what’s driving rising food costs, the country’s largest grocers continue to say they’re not to blame.
Gary Sands, senior vice president of the Canadian Federation of Independent Grocers, said other factors like flooding, droughts, as well as the invasion of Ukraine play a role.
“We’re all looking for a boogeyman to blame higher prices on and it doesn’t exist,” he said. “`We can’t even just blame suppliers, because their input costs are also rising.”
Sands added, “We’re seeing hundreds and hundreds of price increases from suppliers and a lot of the increases are in the double digits so you can’t help but pass those increases on to your customers.”
Canada’s Competition Bureau is examining whether a lack of competition is contributing to rising food costs and is set to publish its findings in June.
— with files from Global News’ Sean Boynton, Craig Lord, Devon Peacock, Andrew Graham, and The Canadian Press.
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