A greater number of players in the food market industry would encourage lower prices for consumers, whose grocery bills continue to inflate, concludes a study published Tuesday by the Competition Bureau.
What there is to know
- More players in the grocery store industry would encourage lower prices, the Competition Bureau concluded in its report entitled Canada needs more competition in the grocery sector, released on Tuesday.
- Grocery retailers’ gross margin has increased “modestly” but “significantly” over the past five years.
- Promoting the arrival of international brands would also have a positive impact on the prices paid by consumers.
Currently, the industry is led by five major players in the country: Loblaw (Maxi, Provigo), Sobeys (IGA), Metro, Walmart and Costco.
Interestingly, the gross margins of major food retailers “have generally increased modestly but significantly over the past five years,” according to the report titled Canada needs more competition in the grocery sector, a title that says a lot about the conclusions reached by the Competition Bureau.
With margins up one or two percentage points since 2017, consumers have had to take between $1 and $2 more out of pocket for every $100 they spend on groceries, reports say. example.
However, before a parliamentary committee in March, the leaders of the main major retailers hammered home that their profit margins had remained stable and that they had not taken advantage of inflation to inflate prices on the shelves.
According to figures released by Statistics Canada on Tuesday, grocery store prices rose 9% in May, compared to 9.1% in April.
And the body’s conclusions are unequivocal. “When an industry is very competitive, companies generally cannot increase their margins. The fact that Canada’s largest grocers have generally been able to do this over the past five years, even modestly, shows that there is room for greater competition in the Canadian grocery sector. »
Two weeks ago, a report by the Standing Committee on Agriculture and Agri-Food recommended, among other things, that the large grocery chains be taxed more if it were proven that they were making excessive profits.
The arrival in the country of international retailers such as Walmart and Costco has greatly contributed to creating healthier competition. But more grocers from overseas are needed, the report also recommends.
“Canada needs solutions to control the price of the grocery basket. Increasing competition is a key part of the solution,” reads the document written after interviews with a dozen industry representatives..
However, it has been impossible to understand to what extent the arrival of Costco and Walmart stores in the country has benefited consumers in constant search of low prices. “We have not quantified the benefits of this competition, recognized a senior official working within the organization, during a briefing with journalists. But it is clear that the entry into the country and the expansion of Costco and Walmart have been beneficial for prices. »
“Favor the growth” of independent merchants, put in place a clear unit price display process to facilitate comparisons between stores and “limit the use of property controls that make it difficult to open new grocery stores” are among the other main recommendations made to the federal government to promote healthy competition.
Modest margins
For its part, the Retail Council of Canada (RCDC), which represents the five main brands in the country, refuses to say whether the addition of new players in the landscape would allow consumers to pay a lower bill at the grocery store. . “Prices are already very low. So, inevitably, there is something that must work in the current system, ”says its president for Quebec, Michel Rochette.
Would the prices be lower if there were more brands? ” It’s delicate [comme question]. Canada and Quebec are fairly open to competition. There is nothing stopping traders from coming here,” he replied.
Mr. Rochette also recalled that the report had “debunked” certain beliefs about the profits made by grocers. “The report did not conclude that the profits were excessive. It was noted that the margins were rather low, modest in fact. »
wishful thinking
The Bureau’s decision to scrutinize rising food prices and analyze competition among major retailers was made in October. Nearly eight months later, the resulting report is nothing more than a series of “pious wishes,” argues Jacques Nantel, professor and retail specialist at HEC Montréal.
“In many ways, these are findings that look a lot like a report [le rapport Plumtre] which was tabled on exactly the same issue in 1973, that’s 50 years ago. He said much the same thing, particularly about the importance of having more competition. »
He also raises the fact that the study recommends both the arrival of major foreign players and the multiplication of independent local merchants. Two ideas difficult to implement at the same time, according to him.
Has this expected report made too much noise for nothing? “Somebody had to do something. But we realize that there is not a lot that can be done [par le gouvernement]. »
Unit price
Quebec is an example to follow, according to the report, with regard to the display of the unit price allowing consumers to compare the prices for cartons of orange juice of different sizes, for example. This type of posting is mandatory in La Belle Province, which is not the case elsewhere in the country.
Best price
Nearly 79% of Canadian consumers sometimes shop at several addresses in order to find the best prices, reveals the study by the Competition Bureau. And in their hunt for bargains, nearly 61% of them are more inclined to frequent a supermarket allowing them to accumulate points as part of a loyalty program.
Expensive labeling
The costs generated by the production of bilingual labels on packaged foods would deter some major international players from settling in the country. “However, some international grocers have told us that they are already used to doing this kind of labels in other countries and that they do not consider this a problem,” it also said.