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Grocers are facing government crackdowns, but will it lead to change?

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In March 2023, executives from Canada’s three largest grocery companies paid a visit to Parliament Hill.

Michael Medline, Galen Weston and Eric La Flèche had been summoned before a House of Commons committee to answer questions about their companies’ rising profits. Facing MPs, they denied accusations of raising prices beyond what inflation warranted.

“It doesn’t matter how many times you say it, write it or tweet it. It simply is not true,” said Medline, the president and CEO of Sobeys parent company Empire.

Canadian politicians have been trying to tackle grocery prices, which have risen significantly in just a few years amid overall inflation and higher interest rates.

But experts say politicians are oversimplifying a complicated issue in an effort to look like they’re meaningfully addressing food inflation, when in reality they have limited tools at their disposal to influence retail prices.

“There is a little bit of political theatre going on here,” said Michael von Massow, a food economy professor at the University of Guelph.

Food inflation in Canada has cooled from its heights, but grocery prices have still risen by more than 22 per cent in four years,according to Statistics Canada, and Canadians are looking for where to point the finger.

A survey by Leger earlier this year found almost 30 per cent of Canadians believe food inflation has been primarily caused by grocery stores trying to increase profit margins. Another 26 per cent think it’s mostly due to global economic factors, while one in five blame the government.

Von Massow and Monica LaBarge, an assistant professor at Queen’s University studying food access and consumer well-being, both said grocery prices are a sensitive topic for consumers, as they’re a frequent and necessary expense that can’t be avoided.

Public pressure has risen on the government to act, said LaBarge, and that’s translating into political pressure on the entities many blame for food inflation.

Besides hauling grocery executives in front of MPs, the government has called on grocers to make plans to stabilize prices; strengthened the competition watchdog’s powers to investigate companies; and established a task force it says will monitor the grocers’ work on price stabilization.

Recent heightened scrutiny of grocers extends beyond Canadian borders. Other countries, such as Australia, France, and the U.S., have also been singling out retailers in efforts to address grocery prices.

In the U.S., President Joe Biden has been under pressure from consumers and lawmakers to address food prices.

The topic of “shrinkflation” — when companies reduce the size of a product but don’t reduce the price accordingly — even came up in his March 8 State of the Union speech.

In March, the U.S. Federal Trade Commission issued a report saying some grocery retailers appeared to have used COVID-19 supply chain issues as an opportunity to hike prices. The FTC has also sued to block a proposed merger between the Kroger and Albertsons supermarket chains, saying it would harm competition and further raise grocery prices.

In Australia, similar pressure has been bubbling up. The government has directed its competition commission to conduct an inquiry into the country’s supermarkets’ pricing practices and the relationship between prices on the shelf and prices along the supply chain.

Australia has a voluntary grocery code of conduct, thoughit’s likely to soon become mandatory.Talk of Canada’s own forthcoming voluntary code has recently been intertwined with talk of food inflation, but the code is intended to make industry negotiations fairer, not lower prices.

Consumers are seeking the causes of food inflation, von Massow said, and there are many of them. But politicians are looking for easy answers.

“The truth is, there is no silver bullet here,” he said.

For the NDP, the focus has largely been on corporate profits, said von Massow, noting the party has advocated for a price cap on grocery store staples. It was NDP leader Jagmeet Singh who bore down on Loblaw’s Galen Weston at the meeting in March last year, repeating, “How much profit is too much profit?”

For the Conservatives, the carbon tax is a major talking point when it comes to food prices, said von Massow, while for the Liberals, there’s a focus on competition — industry minister Francois-Philippe Champagne has said he’s seeking a foreign grocer to enter the Canadian market.

The Competition Bureau last year released a report saying the grocery sector needs more competition to help “bring grocery prices in check.” And with its new powers granted by the Affordable Housing and Groceries Act, the bureau has launched an investigation into grocers’ use of allegedly anti-competitive real estate clauses.

Both von Massow and LaBarge said that despite the focus on competition in Canada and abroad, there are also potential price benefits to consolidation.

“From a purely academic perspective, having a larger organization that has more buying power in the market and so has better ability to negotiate with suppliers should provide lower prices to consumers,” said LaBarge.

Von Massow said he doesn’t think there is strong evidence that grocers contributed significantly to inflation through pricing. However, he thinks the risk of profiteering is actually greater as prices stabilize or even go down: “It’s much easier to lower prices more slowly than it is to raise prices more quickly.”

Without intervening through tools like subsidies, the government can’t do too much about food prices, said von Massow.

In fact, the focus on what specific companies may or may not be doing could be obscuring the more complex reality, he said: that global factors are the biggest contributors to food inflation, like extreme weather from climate change, the Russia-Ukraine conflict, and currency exchange rates.

We need to better mitigate these risks through moves like supply chain diversification, von Massow said.

“It’s easy to focus on domestic markets. It’s easy to look for domestic boogeymen … but I think we’re ignoring the global food system and the integration of the global food system, and the resilience that provides.”

— With files from The Associated Press

This report by The Canadian Press was first published July 28, 2024.

Companies in this story: (TSX:L, TSX:EMP.A, TSX:MRU)

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Looking for the next mystery bestseller? This crime bookstore can solve the case

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WINNIPEG – Some 250 coloured tacks pepper a large-scale world map among bookshelves at Whodunit Mystery Bookstore.

Estonia, Finland, Japan and even Fenwick, Ont., have pins representing places outside Winnipeg where someone has ordered a page-turner from the independent bookstore that specializes in mystery and crime fiction novels.

For 30 years, the store has been offering fans of Agatha Christie’s Hercule Poirot or Arthur Conan Doyle’s Sherlock Holmes a place to get lost in whodunits both old and new.

Jack and Wendy Bumsted bought the shop in the Crescentwood neighbourhood in 2007 from another pair of mystery lovers.

The married couple had been longtime customers of the store. Wendy Bumsted grew up reading Perry Mason novels while her husband was a historian with vast knowledge of the crime fiction genre.

At the time, Jack Bumsted was retiring from teaching at the University of Manitoba when he was looking for his next venture.

“The bookstore came up and we bought it, I think, within a week,” Wendy Bumsted said in an interview.

“It never didn’t seem like a good idea.”

In the years since the Bumsteds took ownership, the family has witnessed the decline in mail-order books, the introduction of online retailers, a relocation to a new space next to the original, a pandemic and the death of beloved co-owner Jack Bumsted in 2020.

But with all the changes that come with owning a small business, customers continue to trust their next mystery fix will come from one of the shelves at Whodunit.

Many still request to be called about books from specific authors, or want to be notified if a new book follows their favourite format. Some arrive at the shop like clockwork each week hoping to get suggestions from Wendy Bumsted or her son on the next big hit.

“She has really excellent instincts on what we should be getting and what we should be promoting,” Micheal Bumsted said of his mother.

Wendy Bumsted suggested the store stock “Thursday Murder Club,” the debut novel from British television host Richard Osman, before it became a bestseller. They ordered more copies than other bookstores in Canada knowing it had the potential to be a hit, said Michael Bumsted.

The store houses more than 18,000 new and used novels. That’s not including the boxes of books that sit in Wendy Bumsted’s tiny office, or the packages that take up space on some of the only available seating there, waiting to be added to the inventory.

Just as the genre has evolved, so has the Bumsteds’ willingness to welcome other subjects on their shelves — despite some pushback from loyal customers and initially the Bumsted patriarch.

For years, Jack Bumsted refused to sell anything outside the crime fiction genre, including his own published books. Instead, he would send potential buyers to another store, but would offer to sign the books if they came back with them.

Wendy Bumsted said that eventually changed in his later years.

Now, about 15 per cent of the store’s stock is of other genres, such as romance or children’s books.

The COVID-19 pandemic forced them to look at expanding their selection, as some customers turned to buying books through the store’s website, which is set up to allow purchasers to get anything from the publishers the Bumsteds have contracts with.

In 2019, the store sold fewer than 100 books online. That number jumped to more than 3,000 in 2020, as retailers had to deal with pandemic lockdowns.

After years of running a successful mail-order business, the store was able to quickly adapt when it had to temporarily shut its doors, said Michael Bumsted.

“We were not a store…that had to figure out how to get books to people when they weren’t here.”

He added being a community bookstore with a niche has helped the family stay in business when other retailers have struggled. Part of that has included building lasting relationships.

“Some people have put it in their wills that their books will come to us,” said Wendy Bumsted.

Some of those collections have included tips on traveling through Asia in the early 2000s or the history of Australian cricket.

Micheal Bumsted said they’ve had to learn to be patient with selling some of these more obscure titles, but eventually the time comes for them to find a new home.

“One of the great things about physical books is that they can be there for you when you are ready for them.”

This report by The Canadian Press was first published on Sept. 15, 2024.



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Labour Minister praises Air Canada, pilots union for avoiding disruptive strike

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MONTREAL – Canada’s labour minister is praising both Air Canada and the union representing about 5,200 of its pilots for averting a work stoppage that would have disrupted travel for hundreds of thousands of passengers.

Steven MacKinnon’s comments came in a statement shared to social media shortly after Canada’s largest air carrier announced it had reached a tentative labour deal with the Air Line Pilots Association.

MacKinnon thanked both sides and federal mediators, saying the airline and its pilots approached negotiations with “seriousness and a resolve to get a deal.”

The tentative agreement averts a strike or lockout that could have begun as early as Wednesday for Air Canada and Air Canada Rouge, with flight cancellations expected before then.

The airline now says flights will continue as normal while union members vote on the tentative four-year contract.

Air Canada had called on the federal government to intervene in the dispute, but Prime Minister Justin Trudeau said Friday that would only happen if it became clear no negotiated agreement was possible.

This report from The Canadian Press was first published Sept. 15, 2024.

Companies in this story: (TSX:AC)

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As plant-based milk becomes more popular, brands look for new ways to compete

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When it comes to plant-based alternatives, Canadians have never had so many options — and nowhere is that choice more abundantly clear than in the milk section of the dairy aisle.

To meet growing demand, companies are investing in new products and technology to keep up with consumer tastes and differentiate themselves from all the other players on the shelf.

“The product mix has just expanded so fast,” said Liza Amlani, co-founder of the Retail Strategy Group.

She said younger generations in particular are driving growth in the plant-based market as they are consuming less dairy and meat.

Commercial sales of dairy milk have been weakening for years, according to research firm Mintel, likely in part because of the rise of plant-based alternatives — even though many Canadians still drink dairy.

The No. 1 reason people opt for plant-based milk is because they see it as healthier than dairy, said Joel Gregoire, Mintel’s associate director for food and drink.

“Plant-based milk, the one thing about it — it’s not new. It’s been around for quite some time. It’s pretty established,” said Gregoire.

Because of that, it serves as an “entry point” for many consumers interested in plant-based alternatives to animal products, he said.

Plant-based milk consumption is expected to continue growing in the coming years, according to Mintel research, with more options available than ever and more consumers opting for a diet that includes both dairy and non-dairy milk.

A 2023 report by Ernst & Young for Protein Industries Canada projected that the plant-based dairy market will reach US$51.3 billion in 2035, at a compound annual growth rate of 9.5 per cent.

Because of this growth opportunity, even well-established dairy or plant-based companies are stepping up their game.

It’s been more than three decades since Saint-Hyacinthe, Que.-based Natura first launched a line of soy beverages. Over the years, the company has rolled out new products to meet rising demand, and earlier this year launched a line of oat beverages that it says are the only ones with a stamp of approval from Celiac Canada.

Competition is tough, said owner and founder Nick Feldman — especially from large American brands, which have the money to ensure their products hit shelves across the country.

Natura has kept growing, though, with a focus on using organic ingredients and localized production from raw materials.

“We’re maybe not appealing to the mass market, but we’re appealing to the natural consumer, to the organic consumer,” Feldman said.

Amlani said brands are increasingly advertising the simplicity of their ingredient lists. She’s also noticing more companies offering different kinds of products, such as coffee creamers.

Companies are also looking to stand out through eye-catching packaging and marketing, added Amlani, and by competing on price.

Besides all the companies competing for shelf space, there are many different kinds of plant-based milk consumers can choose from, such as almond, soy, oat, rice, hazelnut, macadamia, pea, coconut and hemp.

However, one alternative in particular has enjoyed a recent, rapid ascendance in popularity.

“I would say oat is the big up-and-coming product,” said Feldman.

Mintel’s report found the share of Canadians who say they buy oat milk has quadrupled between 2019 and 2023 (though almond is still the most popular).

“There seems to be a very nice marriage of coffee and oat milk,” said Feldman. “The flavour combination is excellent, better than any other non-dairy alternative.”

The beverage’s surge in popularity in cafés is a big part of why it’s ascending so quickly, said Gregoire — its texture and ability to froth makes it a good alternative for lattes and cappuccinos.

It’s also a good example of companies making a strong “use case” for yet another new entrant in a competitive market, he said.

Amid the long-standing brands and new entrants, there’s another — perhaps unexpected — group of players that has been increasingly investing in plant-based milk alternatives: dairy companies.

For example, Danone has owned the Silk and So Delicious brands since an acquisition in 2014, and long-standing U.S. dairy company HP Hood LLC launched Planet Oat in 2018.

Lactalis Canada also recently converted its facility in Sudbury, Ont., to manufacture its new plant-based Enjoy! brand, with beverages made from oats, almonds and hazelnuts.

“As an organization, we obviously follow consumer trends, and have seen the amount of interest in plant-based products, particularly fluid beverages,” said Mark Taylor, president and CEO of Lactalis Canada, whose parent company Lactalis is the largest dairy products company in the world.

The facility was a milk processing plant for six decades, until Lactalis Canada began renovating it in 2022. It now manufactures not only the new brand, but also the company’s existing Sensational Soy brand, and is the company’s first dedicated plant-based facility.

“We’re predominantly a dairy company, and we’ll always predominantly be a dairy company, but we see these products as complementary,” said Taylor.

It makes sense that major dairy companies want to get in on plant-based milk, said Gregoire. The dairy business is large — a “cash cow,” if you will — but not really growing, while plant-based products are seeing a boom.

“If I’m looking for avenues of growth, I don’t want to be left behind,” he said.

Gregoire said there’s a potential for consumers to get confused with so many options, which is why it’s so important for brands to find a way to differentiate themselves, whether it’s with taste, health, or how well the drink froths for a latte.

Competition in a more crowded market is challenging, but Taylor believes it results in better products for consumers.

“It keeps you sharp, and it forces you to be really good at what you’re doing. It drives innovation,” he said.

This report by The Canadian Press was first published Sept. 15, 2024.



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