Are the big grocery chains lining their pockets?

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The are big grocery chains lining their pockets?

Have retailers taken advantage of inflation to increase their profits?

While the price of the grocery cart has increased by 10.8% over the past year, the profits of large grocery chains have more than doubled, according to a recent study by the Institute for Socioeconomic Research and Information (IRIS). The grocery store asked economists to find out if these retailers might not have taken advantage of the situation.

“We asked ourselves this question: would there not have been, in a certain way, an opportunism on the part of the traders, who would have increased the prices a a little more than necessary to increase their profit margin? explains Pierre-Antoine Harvey, economist and associate researcher at IRIS.

This is a conclusion that seems to be shared by a large majority of the Canadian population: a recent poll by the firm Angus Reid* shows that almost 80% of the country's population think that supermarkets have benefited from the inflation to increase their profits.

The general figures show that there may be some responsibility on the part of companies, and if not not the case, they should demonstrate it, thinks the researcher Pierre-Antoine Harvey.

This demonstration, the large food market chains have not didn't want to do it for The grocery store. Indeed, they all refused our interview requests and suggested that we contact the Retail Council of Canada instead.

According to IRIS, grocery stores in Canada have more than doubled their profit margin and taken in more than $3.6 billion in additional profit since 2020.

According Michel Rochette, president of the Quebec office of the Retail Council of Canada, the big chains have indeed increased their sales, but they have also had a lot of expenses in the context of labor shortages.

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Profits have been pretty much flat for at least three or four years. Profit margins in supermarkets have hovered between 1% and 4% for several years, he says.

It's no wonder people have been pointing the finger at grocers , believes Michel Rochette. But we know that profit margins haven't increased in years. It's normal that people have a tougher look at grocers, but that's because it's a [service] they use more than others.

While grocery store profit margins are low, their net profits remain high: according to IRIS, these businesses have more than doubled their profit margin and earned more than $3.6 billion in additional profits domestically. since 2020.

These profits could, however, come from the real estate and pharmacies that Sobey's, Loblaw or Metro own.

Maybe the companies make a profit in their other activities, but they don't take advantage of it to […] lower their prices in food, as they should be, because it's x27;is where they supposedly compete against each other, says Pierre-Antoine Harvey of IRIS.

According to Sylvain Charlebois, of the Laboratory of Analytical Sciences in Agrifood at Dalhousie University, the large chains do not benefit from modulating their prices too much. These companies know that decreasing prices is very easy, but increasing prices after a decrease is not easy. We risk losing market share, we risk scaring customers. So they are careful before playing with the prices.

“We could not demonstrate beyond any doubt that x27;There were questionable retail practices. But that doesn't mean there aren't any elsewhere. »

— Sylvain Charlebois, Senior Director, Laboratory of Analytical Sciences in Agrifood, Dalhousie University

In Europe, major retailers such as Carrefour or Leclerc have already begun to freeze or even lower prices of certain essential products. They are thus committed to reducing their profit margins to help consumers.

In Canada, Loblaw and Metro have announced that they will freeze the prices of several products of house and private labels for a while.

Less and less discounts

In recent years, promotions have become increasingly rare in grocery stores. Data from analyst firm NielsenIQ Canada shows that since last year, grocery stores are offering fewer sales on fruits, vegetables, frozen foods, prepared foods, baked goods, non-food items as well as beauty and health products. Such a phenomenon had not been observed since 2008.

In Canada, unlike the United States, only three major grocery chains share 60% of the market share. If we add Walmart and Costco, we arrive at 80% of the food market in the country.

In Canada, Loblaws, Sobeys, Metro, Walmart and Costco share 80% of the grocery market share.

In the big cities, there are the five big chains x27; power supply. But as soon as you go out into the region, in the smallest towns, you might find one or two grocery stores, explains Pierre-Antoine Harvey.

Three successive major transactions reduced competition: Loblaws' purchase of Provigo in 1998, Metro's purchase of A&P in 2005, and Sobeys' purchase of Safeway in 2013.

Sylvain Charlebois is concerned about this lack of competition. These three transactions led us to the oligopoly we have today, and I questioned these three transactions which gave three big players a lot more bargaining power, says- it.

Recently, the magazine Protect yourselfidentified more than 6,000 prices in six major chains established in Montreal, Quebec and Sherbrooke to find out which grocery store offers the cheapest basket.

The magazine “Protégez-vous” published the results of a survey in which it compared the price of the grocery basket in six major Quebec chains.

The cheapest, c& #x27;is Super C. It's where you can find different foods like fruits, vegetables and meats at a lower cost. We also have Walmart which is doing very well. Maxi is not far behind, concludes Amélie Cléroux, journalist at Protégez-vous.

Choosing a grocery store can save you a lot of money: A family of four who spends $265 each week can save more than $2000 a year if they shop at Super C or Walmart and get the items the cheapest.

The exercise of the magazine Protect yourself also allows us to conclude that going to several stores in search of discounts n is not advantageous. It doesn't make a big difference. We did the exercise. Compared to our economy basket of Super C, we got a saving of $5, says Amélie Cléroux.

An increased role for the government to ensure better competition is one of the solutions advocated by researchers Pierre-Antoine Harvey and Sylvain Charlebois. The Canadian Competition Bureau, which monitors market concentration, should be better equipped.

We also need a code of practice with the role of the state. And finally, there should be a strategic watch to check prices spontaneously, adds Sylvain Charlebois.

On October 17, the House of Commons called on unanimously a survey of the profits of the major grocery chains. The Competition Bureau will have to shed light on inflation and the rising cost of groceries. Elected officials are calling for tougher pricing laws.

Michel Rochette, president of the Quebec office of the Retail Council of Canada, believes that we should expect prices to decrease with the normal course of the current economy.

For his part, Pierre-Antoine Harvey does not believe that the big chains will lower their prices. Several factors will push for an increase or, at least, a maintenance of high food prices. I think the government needs to start thinking about ways to intervene to improve access to food.

The price of the grocery cart has experienced a 10.8% increase in the last year, according to Statistics Canada.

Despite the increase in prices, Canada remains privileged in terms of access to food products, says Sylvain Charlebois.

Yes, we have the right to be frustrated, angry and even worried about the rising prices at the grocery store. But at the same time, I think that Canadians have access to healthy products, to good quality products that are relatively inexpensive compared to other economies in the world, concludes Sylvain Charlebois.

< p class="e-p">With information from Annette Gonthier

Report by Johane Despins and Annette Gonthier, directed by François Perré , airs at L'épices on Wednesdays at 7:30 p.m. and Sundays at 1:30 p.m. on ICI TÉLÉ, as well as Saturdays at 5:30 p.m. and Sundays at 4:30 p.m. on ICI RDI .

* The Angus Reid Institute conducted its online survey of 2,279 adult Canadian Angus Reid Forum members from August 8-10, 2022. For comparison purposes only , a probability sample of this size has a margin of error of plus or minus two percentage points 19 times out of 20.

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