Food inflation: are the chains really to blame?

Spread the love

Food inflation: the chains really to blame?

Ottawa and Quebec are working on a “code of conduct” that would involve both levels of government as well as food industry producers, suppliers and retailers.

Food inflation has remained above general inflation for more than a year.

Experts don't seem to agree on the origin of the inflationary overheating in the area of ​​food, where the rise in prices exceeds 11%, while the consumer price index is now at 7%. Everyone agrees, however, that there is indeed a problem within the country's food supply chain.

During the Facts First program broadcast on ICI Première, three guest experts all acknowledged that the high prices lead to difficult situations for households.

Pierre-Antoine Harvey, an economist at the Institute for Socioeconomic Research and Information (IRIS), defended the study published by his organization earlier this week, which claims that the profits of major grocery chains have more than doubled over the past year.

One ​​thing is certain: in today's environment, it is not [the grocery chains ;food] which seem to be suffering from inflation, he said.

Also according to Mr. Harvey, the profit base of the large chains has more than doubled in the first six months of 2022, all with record profit rates not even seen before the onset of the COVID-19 pandemic.

The economist recognizes, however, that it is impossible to distinguish the origin of the price increases that have led to food inflation exceeding general inflation for more than one year.

For his part, Stéphane Lacasse, director of public affairs and government relations for the Association of Food Retailers of Quebec, replied that food store operators have recorded growth in their revenues that varies between 1% and 3% but the expenses also increase: maintenance costs, rent, wages, and there is a shortage of staff, like everywhere else… If my supplier sells me the product 10 or 11% more dear, i need to make my store profitable.

Mr. Lacasse also said that he could not comment on chains in general, but he recalled that these are often the owners of drugstore chains, which are said to be big sources of income.

The Metro chain also owns the Jean Coutu pharmacy chain.

Major food companies, Mr. Lacasse also pointed out, are publicly traded and must be accountable to their shareholders.

As for Sylvain Charlebois, professor of agri-food distribution and policy at Dalhousie University's Faculty of Management and Agriculture, he recalled that even if the food inflation rate hovers around 11% in the country, Canada is doing much better than many other G7 countries. It's 13% in the United States, he pointed out.

Mr. Charlebois is also against the IRIS study on the profits of grocery chains. Relying on work done a few months ago, the professor maintained that the profit margins of Canadian grocers have been the same for five years, at between 2 and 4%.

The amounts are increasing, but a 2% in 2022 doesn't look like a 2% in 2017 at all.

Another fact worth noting, Professor Charlebois pointed out: Statistics Canada recently indicated that the amounts spent on food products in grocery stores are down more than 4% over a period of one year and therefore that the volume of sales such products has declined substantially.

“It is not necessarily at retail that there is problems, but there is a problem within the [supply] chain. »

— Sylvain Charlebois, professor at Dalhousie University

For this, Pierre-Antoine Harvey offered an explanation: Food sales are indeed decreasing because, during the pandemic, we hardly went to restaurants anymore, we turned to grocery stores; but there, there is a return of life in the restaurants. It's normal for sales to be down, he said.

While they don't necessarily agree on the causes, the three experts all agree that the Competition Bureau's investigation into the practices and profits of large food chains claimed this week by a unanimous resolution passed in the House of Commons is a good thing.

Added to these voices are those of François-Philippe Champagne and André Lamontagne, respectively Federal Minister of Innovation, Science and Industry and Quebec Minister of Agriculture, Fisheries and Food.

Federal Minister of Innovation, Science and Industry, François-Philippe Champagne

Both men welcome the holding of this investigation; Mr. Champagne also said he had just returned from Washington, where he rightly raised the issue of major international brands, such as Nestlé and PepsiCo, allegedly inflating their profit margins.

We met [Deputy Prime Minister] Chrystia Freeland and I with the Retail Council of Canada to ask them what they could do, and I hope that d' other retailers will follow Loblaw's lead, he said.

Indeed, this company recently announced the price freeze of its No Name products for several weeks. The Metro chain responded by announcing a similar decision while pointing out that this practice was already commonplace, which Loblaw denied.

And even the impact of this measure seems uncertain; if she has the backing of the Champagne minister, Stéphane Lacasse, of the Association of Food Retailers of Quebec, says he fears that in the event of a price war between the big brands, it will be the small retailers , even the small suppliers, who suffer.

Could Ottawa intervene more directly to prevent excessive price increases? You will understand that there is no one who has the regulatory power to set prices, but I think that we still have influence if we denounce all together, mentions François- Philippe Champagne.

In Quebec, Minister Lamontagne also recognizes that the government does not have the power to intervene directly to freeze prices or to set them.

André Lamontagne, Minister of Agriculture, Fisheries and Food of Quebec

What he proposes however, is the creation of a “code of conduct” that producers, suppliers and retailers would adhere to in order to ensure good relations between all these players.

Also according to Mr. Lamontagne, representatives from all the provinces and from Ottawa would be members of the group responsible for designing this code of conduct, the first outline of which would be outlined in #x27;here November.

However, Minister Lamontagne did not want to indicate whether this code of conduct would be based on a regulatory basis, which would therefore involve consequences if a partner deviated from it. The partners have to be willing and the partners have to want it to work better, he simply said.

In the meantime, both Quebec and ;Ottawa, as well as several experts, are awaiting the conclusions of the future investigation by the Competition Bureau.

However, this organization would not be flawless, argued Sylvain Charlebois, since the same regulatory body that allowed Loblaw to buy Provigo in 1998, Metro to buy A&P in 2005 and Sobeys to buy Safeway in 2013, all three transactions 30 years that have brought us to where we are today, he says.

Some 80% of the Canadian food market today is owned by five major brands, including Loblaw, Metro and Sobeys.

Previous Article
Next Article