(Ottawa) Allegations of immoderate profit-seeking in the Canadian food industry are unfounded, witnesses argued Tuesday before a Commons committee studying food prices.
Food researcher Sylvain Charlebois of Dalhousie University said these allegations of relentless profit-seeking by major supermarket chains needed to be put to rest once and for all.
Since last year, the Commons Standing Committee on Agriculture and Agri-Food has been looking into “efforts to stabilize food prices” in Canada.
Mr. Charlebois told the committee on Tuesday that although profits at the three major chains – Loblaw, Empire and Metro – have increased in current (or non-indexed) dollars, their gross margins have remained constant for more than five years.
Karl Littler, senior vice-president of public affairs at the Retail Council of Canada, told MPs that grocers had very little to do with food inflation and that “most of the rise in food prices was occurring upstream in the supply chain, at the producer and processor level.
This is not to blame these actors, he added, but rather to point out that the global rise in the costs of feed, fuel and fertilizer, as well as the rising rates of Interest and labor costs are reflected throughout the supply chain.
“We are faced with recurring attempts to present grocers as cartoon villains,” argued Mr. Littler.
“Coordination” between chains
Professor Charlebois said the government should be more concerned with price coordination within the industry, citing a recent example where Loblaw reduced its discounts on sale items the day before the expiration date, citing its alignment with its competitors. Loblaw then reversed course, faced with angry consumer reactions.
Mr. Charlebois also highlighted the old practice of imposing an industry-wide blackout period on supplier price increases. He argued that the Federal Competition Bureau should take a more proactive role in monitoring potentially anti-competitive behavior.
Metro CEO Eric La Flèche said last week that retail prices of certain grocery products would begin to increase in February, after the ban period ends.
The industry has come under scrutiny from the committee and federal industry and food ministers as food prices outpace inflation.
Overall inflation in Canada accelerated to 3.4% in December, but food prices rose 4.7% that month.
Executives from the largest supermarket chains, including Walmart Canada and Costco, appeared before the committee to answer questions about their profits during times of inflation.
A long supply chain
Leaders rejected suggestions they were responsible for high food prices.
“The truth is that we are at the end of a very long food supply chain that has economic inputs at every step,” Michael Medline, president and CEO of Empire (IGA and Sobeys, notably).
Large grocers were also summoned by the government last fall to present their plans to stabilize food prices.
Industry Minister François-Philippe Champagne expressed his disappointment with grocers, saying they have not been as transparent as he hoped in their plans.
Mr. Champagne wrote to Competition Bureau Commissioner Matthew Boswell last week, suggesting that he conduct a follow-up study of the grocery sector using his new subpoena powers to obtain financial information. .
However, the federal government did not follow through on its threat to tax grocers if they did not cooperate. At a news conference Tuesday, Finance Minister Chrystia Freeland said the government was still prepared to use all tools at its disposal, but did not say whether a tax was being considered.
Difficult code of conduct
MM. Charlebois and Littler were among several expert witnesses who spoke to the committee Tuesday about grocery store prices, the code of conduct and the carbon tax.
Mr. Charlebois told the committee he should prioritize the grocery store code of conduct, which is almost finished but stalled – Loblaw and Walmart say they are not ready to adhere to it.
The two major grocers have already told the committee that they are concerned that this code, as written, will increase food prices for Canadian consumers.
Supporters of the code say it will create a more level playing field for suppliers and small grocers in Canada’s food retail sector.
Keith Currie, president of the Canadian Federation of Agriculture, told the committee that this code is about integrity and fairness. “We all know that businesses up and down the supply chain must be profitable to continue to exist,” he argued.
The code is meant to be voluntary and industry-led, but without buy-in from the biggest grocers it will not succeed, Professor Charlebois said.
Metro’s CEO has already told the committee the same thing: The chain is ready to adhere to the code, but the participation of all grocers and suppliers is essential to its success.
Over time, lawmakers will face increasing pressure to use the law to pass the code, said committee chair Liberal MP Kody Blois, although that was more complicated because it would also involve the provinces.
But Diane Brisebois, CEO of the Retail Council, told MPs she remained optimistic the code could be in force this year, adding the steering committee is currently in discussions with various businesses to try to achieve to an agreement.