December 5th – OTTAWA, ON
Dr. Sylvain Charlebois (Director, Agri-Food Analytics and Professor, Dalhousie University, Agri-Food Analytics Lab): Thank you, Mr. Chair, committee members. I would like to thank the committee for inviting me again for this important discussion on food affordability.
As food prices rise, many are quick to blame grocers for profiteering and taking advantage of consumers. The notion of profiteering has emerged as one of the most talked about issues in the last few months.
In one of our recent reports, we used publicly available data to look at the gross profit for each of the three big Canadian grocers: Empire/Sobeys, Metro, and Loblaws. We calculated their respective “best” and “average” performances for the last six years. We failed to see any evidence of profiteering on all accounts.
But this doesn’t mean changes are unnecessary. Grocers are incredibly diversified, and sell cosmetics, drugs, and clothing. Margins are different for these verticals, and of course the ethics and social responsibilities of selling bananas or eggs are quite different than when selling lipstick. Grocers have started to report their food sales separately from their non-food operations. Unlike selling t-shirts or perfume, selling food, a necessity of life, is inherently ethical and the stakes are very different. That needs to continue.
Still, some higher prices remain difficult to explain as we remain concerned about certain verticals. Meat and bakery are good examples.
The Competition Bureau has constantly failed the Canadian public by not providing forceful support to lawmakers in Canada when it simply endorses acquisitions and oversees investigations with little or no vigour. The bread price scandal is a good example. After seven years, the investigation is still ongoing. We’ve also seen investigations into meat and salmon, neither of which have provided definitive results. Our nation has seen consumer trust being compromised which is spilling over into our relationship with grocers due to the Competition Bureau’s baggage, that is, the awkward unfinished business it has with many files. Canadian consumers feel grossly unprotected.
In the U.S., things are very different. Kroger is currently trying to acquire Albertsons for almost $25 billion, which would make Kroger the second largest grocer in America. Kroger could be asked to let go of almost 400 stores, creating a rival to the new grocer. This would never happen in Canada. When Provigo was acquired by Loblaws in 1998, or when Metro acquired A&P in 2005, or even Sobeys buying Safeway out west, in 2013 barely anyone raised an eyebrow during the proceedings. Over the years, we have seen many independent grocers disappear as a result. Consumers everywhere deserve more retail options.
The code of conduct is necessary. Many Canadians are unaware of the fact that in the food industry, suppliers have to pay grocers to do business. The fees are justified by merchandising costs, shelf space, things that everyone expects. However, in recent years things have changed. Companies like Loblaw, Walmart and Metro are abusing and some levies have been imposed quickly, incidentally and unilaterally. It is now more difficult in Canada for processors and independent grocers to compete.
A code of conduct for grocers will aim to change the culture of an industry where vertical coordination and collaboration barely exist. It’s also about tackling a broken business model. A code can neutralize power relations within the chain, stabilize retail prices, emphasize value and innovation for consumers, improve the security of the domestic food supply and encourage investment in the agri-food sector.
The Chair: Thank you very much, Mr. Charlebois.