Soaring food prices, record profits prompt questions about Canada’s ‘cosy oligopoly’


The Current56:45The skyrocketing price of food — and who or what’s guilty

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With food costs hovering, Toronto resident Jason Gemmill fastidiously plans his household’s meals per week upfront, and makes use of apps to smell out offers earlier than he even units out for the grocery retailer.

“I’ll undergo the native flier for the shop we’re about to go to, and see what’s on sale there, and that sort of informs the meal decisions,” Gemmill advised The Current’s Matt Galloway. 

“Occasionally there will be one thing out of the strange that we’ll must pay no matter value it’s — however sometimes it is gross sales,” he stated.

Gemmill and his spouse each work, and funds $110 per week on food to feed themselves and their two youngsters, aged 11 and 15.

While accompanied by The Current on a latest procuring journey, he seen value will increase on vegetable oil and meat. But even with a fastidiously deliberate procuring checklist, he needed to put again pepperettes he was shopping for for his youngsters’ lunchboxes as a result of the value in retailer was greater than marketed.

“The app lied to me, we’re not going to purchase these in the present day. Like these are $11 … double digits is a bit of a lot for one thing like that, so we’ll skip that this week,” he stated.

WATCH | Food costs in Canada proceed to soar

No reduction for food costs regardless of total inflation exhibiting indicators of slowdown

Food costs in Canada rose on the quickest tempo since 1981, regardless of Statistics Canada’s newest figures exhibiting total inflation cooling down for the third month in a row.

Food costs continued to rise in September at an inflation fee of 11.4 per cent, at the same time as Canada’s total fee of inflation slowed for the third month in a row. The figures from Statistics Canada put food inflation at twice the general inflation fee, and the quickest tempo of enhance since August 1981.

Economist Jim Stanford stated greater costs are being pushed by a number of elements: provide chain interruptions in the course of the pandemic; the affect of local weather change on agriculture; and the battle in Ukraine’s impact on vitality costs. 

“Then on prime of all of it, there’s a terrific large layer of cream that the supermarkets themselves are gathering. Profits in food retailing are up very, very strongly in comparison with pre-COVID occasions,” stated Stanford, an economist and director of the Centre for Future Work.

In probably the most not too long ago accomplished quarter, Canada’s three largest grocery chains have all posted revenue will increase of tens of tens of millions, in contrast with the identical interval pre-pandemic in 2019.

While not all these profits derive from food gross sales, the figures have bolstered accusations of profiteering towards Loblaw Companies Ltd., (which operates Loblaws, Zehrs, No Frills and Real Canadian Superstore); Metro Inc. (which owns Metro, Food Basics and different manufacturers); and Empire Co., (proprietor of Sobeys, IGA, Safeway, Farm Boy, Foodland, ContemporaryCo and different manufacturers).

The Current requested interviews with the heads of Loblaw, Metro, and Empire a number of occasions. All requests have been declined.

Stanford stated grocery chains face elevated prices from producers and suppliers, who’re additionally on common posting elevated profits. But he argued that some massive grocery chains are “passing on their prices — after which some” to shoppers.

“I’m not saying that their greed has sparked the entire drawback … however their greed is actually current within the elevated profits that they are producing by way of this inflationary episode.”

‘A comfy oligopoly’

Stanford described Canada’s grocery store business as “a comfy oligopoly” — or a market dominated by a small variety of suppliers.

“Three main chains have a dominant market share, and they can train value energy each over shoppers, but in addition over their very own suppliers and their very own employees,” he stated.

WATCH | Are the grocery giants gouging us? 

Are the grocery giants gouging us?

Sylvain Charlebois, Director of Agri-Food Analytics Lab at Dalhousie University, says prices for the large grocery chains have legitimately gone up, however the business as an entire is taking lots of warmth from shoppers for greater food costs proper now.

That sort of market focus can typically result in greater costs, stated Phoebe Stephens, an assistant professor in food safety and sustainable agriculture at Dalhousie University.

“When you may have few gamers, firms can match one another’s value will increase fairly than competing with them,” she stated.

On Oct. 17, the federal agriculture committee not too long ago handed a movement calling for an investigation into grocery retailer profits — which might see CEOs of the three main chains seem earlier than the committee to reply questions.

On Monday the Competition Bureau, Canada’s shopper watchdog, additionally introduced that it’ll examine the sector, with a view to recommending measures to enhance competitors within the sector.

The Current requested an interview with the Competition Bureau, however the request was declined — as was a request for interview with Finance Minister Chrystia Freeland.

Why do we have now the necessities of life in our financial system priced in line with no matter a non-public firm thinks they will promote it for?– Jim Stanford

Simon Somogyi, a professor and Arrell Chair within the Business of Food at University of Guelph, stated “it is onerous to definitively say” whether or not the large chains have taken benefit of widespread inflation to cost clients extra.

Understanding the general profitability would require particular person merchandise, provider prices and mark-ups, so as to perceive the revenue margins generated, he stated.

“That’s not out there within the public sphere and investigations ought to happen to see precisely what that’s,” he stated.

Somogyi is not assured that the Competition Bureau can carry about big change, however thinks it is a chance to have a look at the surging profits and the affect on shoppers throughout many sectors.

“Will the Competition Bureau have the ability to carry in additional grocers? No. Will it have the ability to set costs for shoppers? No,” he stated.

“But it might be good if it was trying into profitability throughout all several types of companies, as a result of … this is not simply an secluded case. It’s a pattern.”

WATCH | Competition Bureau to review rising grocery costs

Competition Bureau to review rising grocery costs

Canada’s shopper watchdog says it should research competitors within the grocery business and whether or not having extra retail rivals might push again on value will increase. But some business consultants say the problem goes deeper than what number of grocery chains there are.

Powers to interrupt up firms

Stanford stated the spike in company profits, whereas shoppers are struggling, additionally prompts some larger questions.

“The actuality is we have now an financial system the place we empower personal firms to cost regardless of the market will bear. And some folks assume that is pure and wholesome. Some folks assume it is grasping,” he stated.

“I believe we should always ask a basic query: why do we have now the necessities of life in our financial system priced in line with no matter a non-public firm thinks they will promote it for?” 

He want to see the powers of competitors regulators strengthened, together with “penalties for collusive behaviour, but in addition even issues like breaking apart massive firms which have an excessive amount of energy.”

He additionally desires to see folks protected against inflation because it occurs, by holding wages in step with rising costs, and income-support programmes for low-income households.

And if crucial by way of taxation, “take a few of these profits and provides it again to the shoppers whose higher-than-normal funds clarify these profits,” he stated.

“I believe there’s lots of alternative ways to go at it. None of them simple, none of them magic bullets.”

With recordsdata from CBC Business. Audio produced by Amanda Grant, Anne Penman, Kate Cornick and Brianna Gosse.


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