When ALDI moved to Australia more than 20 years ago, no one would have predicted that the ‘no-nonsense’ German chain would whip the food industry.
Its first two stores, four times smaller than conventional grocery stores, sold barely 900 products, most of unknown brands. No free bags at the exit, no loyalty program. Just low prices.
With this successful recipe, ALDI gained 9% of the Australian market, which significantly lowered prices in all grocery stores. A phenomenon that has been observed across the twenty countries where the retailer has established itself.
The kind of phenomenon that we would very much like to see in Canada to reduce the grocery bill, which is increasing much faster than inflation (9% in May, against 3.4% for general inflation).
Whose fault is it ?
Yes, the pandemic and the war in Ukraine have increased food costs.
But grocers with the big end of the stick have taken the opportunity to increase their profit margin by one or two percentage points over the past five years, the Competition Bureau estimates in a report filed on Tuesday.1.
One or two percentage points may seem very thin. But that’s up to $2 billion across the country, or $150 on average per household each year.
And the situation may be even worse, because some companies have had the nerve not to provide the information requested by the Competition Bureau, which does not have the means to compel them to do so, unlike most of its counterparts. of the G7.
It is pathetic. Our guard dog is half-blind.
Canadian consumers deserve better.
For decades, they swallowed industry consolidation unflinchingly. Five of the eight major chains that existed in 1986 (Steinberg, Provigo, A&P, IGA and Safeway) were absorbed by Loblaw, Sobeys and Metro. Despite the arrival of Costco and Walmart, there are only five major players left who make life difficult for some 6,900 small independent grocers.
Here again, the Competition Bureau lacks teeth.
Canada’s lax laws make it difficult to object when a large grocer buys a small number of stores in an urban setting, where there are five or six other grocery stores nearby, in the absence of clear evidence that the transaction will significantly harm competition.
So, quietly, the erosion continues. Competition is decreasing. And prices are rising… which is fueling the anger of consumers who feel that grocers are playing behind their backs.
It must be said that the smell of collusion is stronger than ever.
Last week, Canada Bread agreed to pay a record $50 million fine in the bread cartel case, where many players, who are still under endless investigation by the Competition Bureau, allegedly colluded to set prices.
And now we learn that their “upside profit management strategy” could be even broader and touch the meat, according to an email sent by the former boss of Maple Leaf Foods, Michael McCain, reported in the Globe and Mail.
Clearly, the Competition Bureau has its work cut out for it. And our governments too have work to do to improve competition, by reducing the barriers that undermine competition.
For example, the big names in food often use their weight to prevent the arrival of businesses that sell similar products in the same shopping center as them or in an establishment that they are divesting.
Why not follow the example of Australia, which forced the big grocers to phase out this kind of strategy? If we want a new competitor to set up here – and bring down prices like ALDI in Australia –, the commercial space must still be available.