Like many around the world, Canadians are suffering with the food charge. But amid accusations of “greed” (taking advantage of the credit of inflation to raise charges), the country’s largest supermarket chains say they are not to blame.
With rising food prices, Canadian grocery giant Loblaw has made a promise: the price of products on its lowest-priced personal label, No Name, will remain frozen for 3 months.
The offer, announced in a promotional email through Loblaw CEO Galen Weston on Oct. 17, was not well received. Some called it an exposure stunt, while others said it was too little, too late.
The bitter reaction is not right. Inflation has slowed in recent months, but the food burden continues to rise with increases reaching a 41-year high.
At the same time, giant corporations, which add grocery stores, are posting record profits. Loblaw’s profit in the first quarter of this year was up nearly 40% year-over-year, and its adjusted net income source was up 17%.
In Canada, where distrust of grocery tycoons has run deep since a recent bread pricing scandal, this dilemma is political.
Lawmakers have accused supermarket chains of taking credit for inflation to raise much-needed funds, a phenomenon dubbed “greed. “
On the same day Weston’s letter was sent, the Canadian parliament unanimously approved a move accusing grocery store CEOs of “corporate greed. “On Monday, the federal festival authority launched an investigation into the sector.
But is there any fact in the concept of greed?Economists say it’s complicated.
For families who frequent grocery stores, it’s hard to ignore the drastic price increase. Canadian food prices rose 11. 4%, with headline inflation at 6. 9%.
“There’s no area for consumers in the grocery store, not even in the freezer aisle,” said Sylvain Charlebois, a professor at Dalhousie University in Nova Scotia, who has published an annual report on food costs in Canada since 2010.
The UK has also seen a drastic increase in food costs: bread and cereals rose 12. 4% year-on-year in July, and oils and fats rose 23. 4%.
The same is true for the United States, where the food charge rose 13. 5% in September last year.
In all three countries, the factors driving the cost of food are similar: an increase in demand for food products since the beginning of the pandemic, coupled with outbreaks of covid-19, has disrupted supply. Add to that the war in Ukraine, which has affected fertilizer materials, wheat and other crops, causing global loads to skyrocket.
This year’s bad weather has also disrupted the expansion of some crops and fuel has become more expensive.
As shoppers become increasingly frustrated, grocery retailers around the world need to freeze costs as a sign of solidarity.
In May, U. S. company Weis Markets announced a multibillion-dollar crusade to reduce the prices of its best-selling frozen foods. France’s Carrefour froze the value of one hundred products in August, and Britain’s Asda and Morrisons lowered prices in April.
But when Canada’s Loblaw froze costs months later, in October, it was too late.
“Frankly, they haven’t done anything for a long time,” said David MacDonald, an economist at the Canadian Centre for Left-Alternative Policy.
He added that charges for products the shopkeeper had frozen were already higher since the beginning of the year. Unnamed bird wings, for example, charge C$11. 99 ($8. 75; £7. 75). They now cost $13. 99.
Loblaw CEO Weston said the value increases at its retail stores were “infuriating” beyond his company’s control. Some, like Canadian MP Alistair MacGregor, disagree.
The announcement, said the left-leaning New Democrat, “demonstrates the fact that the CEO of Loblaw has had the strength to freeze prices. “
He also criticized the company for making the announcement on the same day Parliament was due to vote on the food retailers’ profit investigation, calling it a “public relations attempt to divert negative attention. “
While grocery stores report an increase in profits, Mr. MacGregor said there will most likely be “an ethical call for businesses to reform their business practices” to curb inflation and help families who suffer.
In dollar terms, grocery stores earned an average of $1500 million in the first two quarters of 2022, up from $800 million in 2019. Its margins are also higher than before the pandemic: 3. 5% in 2022, up from 2% in 2018, despite emerging production costs.
Grocery stores attributed higher margins to higher sales and efficiency.
Meanwhile, an August vote indicated that more than a portion of Canadians can’t keep up with the existing living burden, and 78% of penny shopkeepers are to blame for rising food prices.
Just a few years ago, Mr. Charlebois, whom Loblaws denounced for his role in a bread fixing scandal that saw primary stores conspire with advertising bakeries to set higher costs for 14 years.
For his role in the scandal, Loblaws presented $25 gift cards as an olive branch.
“It bothered a lot of Canadians at the time,” Mr. Charlebois.
But after reading recent earnings reports from U. S. grocery giants, the U. S. grocery giants have recently been released. In the U. S. and Canada, Charlebois said it was not transparent whether responsibility for emerging prices lay entirely with retailers.
He found that while revenues are higher, companies’ gross margins are higher through what he called modest.
“Yes, they had record profits in dollar terms,” Mr. Charlebois said. “But when you look at the margins, they’re relatively similar. “
He warned that this rules out irregularities in other parts of the supply chain, from food processing to transportation.
In Quebec, meatpackers in particular are coming under fire for allegedly plotting to raise prices for beef sold in the province. One of the companies in question, JBS, already settled a lawsuit earlier this year in the United States.
However, some suppliers have accused grocery stores of not accepting value increases and imposing more fines on them, a factor that deserves to be addressed by implementing an industry-wide code of conduct in Canada.
That’s why many welcome the resolution by the Agriculture Committee and Parliament’s Competition Office to read about the grocery retail market – research that, according to politicians like Mr MacGregor, will pave the way for better industrial practices in the future.
“It’s up to Canadians,” who will at least be clear about the value of their food, Mr. Charlebois.
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