The leaders of Canada’s major grocery chains insist that food price inflation is not caused by profit-mongering and that their margins on food-related profits have remained low. The CEOs and presidents of Loblaw Cos. Ltd., Metro Inc. and Empire Co. Ltd. — which operates chains including Sobeys, Safeway and FreshCo — appeared in front of a parliamentary committee that is studying inflated grocery prices.

Their testimony came amid calls from federal politicians, including Finance Minister Chrystia Freeland and NDP Leader Jagmeet Singh, for the industry to be more transparent about what is driving its record-high profits.

It is “false” to suggest that grocers are responsible for high food prices, all three leaders told members of Parliament, saying food inflation is a global problem. Michael Medline, the president and CEO of Empire said that, “[t]he truth is we are at the end of a very long food supply chain that has economic inputs at every step and stage.”

Grocery prices were up 11.4% in January compared to 2022, nearly double the overall rate of inflation of 5.9%. At the same time, there has been a rise in corporate profits writ large, and major grocers have been outperforming. All three companies posted higher profits in the first half of 2022 compared to their average performance over the past five years, according to a report last fall by the Agri-Food Analytics Lab at Dalhousie University.

Galen Weston, the billionaire chairman and president of Loblaw, said the company has made bigger profits off financial services and apparel and pharmacy sales, which he said represents more than half of its business. He said the company’s profits amount to about $1 for every $25 spent on groceries, and food prices have increased about 25 times faster than profit margins on food products.

The NDP had insisted on the meeting to hold CEOs accountable for what they term “greedflation,” and Singh advertised his showdown with Weston in a slate of social media posts. 

Singh, subbing in for the party’s agriculture critic, directed his questions to Weston, who was sitting just a few metres away. “They look at you and they see you making record profits. How can you justify that when families are struggling to put food on the table for their kids?” he implored. 

“We feel and understand that 95% of Canadians are concerned about food prices. But grocery chain profits are not the reason for food inflation,” Weston answered.

“How much profit is too much profit?” Singh asked repeatedly.

Weston proffered: “Reasonable profitability is an important part of operating a successful business.” He added that the company reinvests those profits into opening new stores and hiring more employees. “It doesn’t go to me. It goes back into this country.”

The CEOs were asked whether they would commit to sharing detailed financial statements with the Competition Bureau, which is studying whether a lack of competitiveness in the grocery industry may be contributing to higher prices. They all said they were doing so, and indicated support for a new grocery code of conduct.

“I think overall we got answers,” Liberal MP Leah Taylor Roy said after the meeting. She said there’s a lot more work to be done by the Competition Bureau, which is expected to deliver a report and recommendations to the federal government in June.

Medline said that so far in 2023, the volume of cost increase requests from suppliers has been similar to that of last year. But there is a “slight indication” that such requests will slow in April. He was quick to assert that he was not going to “throw our supplier partners under the bus. They are also doing their best in extraordinary times. They are greatly impacted by rising costs, which, unfortunately, they are forced to pass on to retailers,” he said.

During the hearing, both Medline and Eric La Fleche, the president and CEO of Metro, questioned why MPs seemed to be excluding from their study large American companies that operate in Canada. The committee unanimously approved a motion to invite Horacio Barbeito, the president and CEO of Walmart Canada, and Pierre Riel, who is at the helm of Costco Wholesale Canada.

An unlikely alliance between Canada’s independent grocers and the country’s three largest chains is forming. The allegations have prompted an often vocal critic of the chains to take the unusual step of defending the big grocers on the issue of food inflation.

“I’m no apologist for the chains by any means — we have lots of issues with them,” Gary Sands, senior vice-president of public policy with the Canadian Federation of Independent Grocers, said in an interview. “But the independents are seeing the same supplier increases as the chains,” he said. “The retailers at the end of the supply chain have become the focal point of everybody’s angst about the rising price of food … but we know these factors are beyond their control.”

Source: Globe and Mail
Source: Financial Post
Source: The Star
Source: CBC
Source: CTV News
Source: The Star