Loblaw president and executive chairman Galen Weston said “the idea that grocers are causing food inflation is not only false, it’s impossible.” (THE CANADIAN PRESS/Spencer Colby)
The top executives from Canada’s biggest grocery stores say they are not causing or profiting from food inflation, pointing to higher supplier and input costs as key factors driving rising prices.
The CEOs and presidents from Loblaw (L.TO), Empire (EMP-A.TO) and Metro (MRU.TO) testified before the House of Commons agriculture committee on Wednesday as part of an investigation into food inflation.
All three leaders said grocers were not responsible for soaring food prices, noting that this period of high food inflation is a global phenomenon.
“For those who say grocers are profiteering, the math just doesn’t add up,” Loblaw president and executive chairman Galen Weston said, adding that food prices have increased 25 times faster than profit has. He says the company earns $1 in profit in a $25 grocery basket, which means that while the total basket price has increased by $4 since inflation took off 18 months ago, Loblaw’s profit margin has gone up by 15 cents.
“At Loblaw, none of those profits came from higher food margins. Our retail prices have not risen faster than our costs,” Weston said.
“So no matter how many times you read it on Twitter, the idea that grocers are causing food inflation is not only false, it’s impossible.”
The cost of groceries has soared in the past year, increasing at rates not seen in more than four decades. Food inflation has persisted, even as the broader Consumer Price Index has decelerated from the peak reached in June last year. Canada’s inflation rate eased to 5.9 per cent in January, but the cost of food purchased from grocery stores increased 11.4 per cent, up from the prior month.
The persistently high prices have led to increased pressure and scrutiny on grocery retailers. In addition to the agriculture committee’s study on food inflation, the Competition Bureau announced last October that it would examine grocery competition in the country and whether it has driven food prices higher.
How much profit is too much profit?Jagmeet Singh, leader of the New Democratic Party
Members of Parliament grilled executives on Wednesday about the increase in profitability at Canada’s biggest grocery chains amid rising prices. They also asked about whether the grocers would commit to a grocery Code of Conduct, something currently in the works that aims to enhance “transparency, predictability and fair dealing” in the food supply chain.
NDP leader Jagmeet Singh, who has accused the grocers of “greedflation”, subbed in for the party’s agriculture critic and directed his questions to Weston.
“We have families that are struggling to buy food for their kids in this country, a G7 country, and they look at you and they see you making record profits. How can you justify that when families are struggling to put food on the table for their kids?” Singh said. “How much profit is too much profit?”
Weston said that “reasonable profitability is an important part of operating a business,” repeatedly referring to Loblaw’s $1 in profit for every $25 of groceries sold.
“We at Empire are not profiting from inflation. It doesn’t matter how many times you say it, write it, or tweet it, it is simply not true,” Michael Medline said, pointing to geopolitical events, rising input costs, extreme weather, soaring energy prices and labour shortages as factors contributing to rising prices.
“The truth is we are at the end of a very long food supply chain that has economic inputs at every step and stage.”
Eric La Flèche also says Metro grappled with an “unprecedented number” of price increases from its suppliers through 2022. He says the company received more than 27,000 price increase requests last year, with the hikes averaging more than 10 per cent.
“This year, we continue to receive a large number of price increase requests from our suppliers,” he said.
“I hope all members of the committee recognize that the entire supply chain is in an unprecedented period of prolonged stress. Focusing on grocers will not solve the problem of food inflation, because we are not causing it and we are not benefiting from it.”
Senior executives from Loblaw and Empire had previously testified before the same committee in December, but at the time MPs questioned why the chief executive officers of Canada’s largest grocers did not appear before the committee. Senior executives told the committee in December that rising supplier costs were to blame for soaring food prices and that retailers are not taking advantage of inflation to boost profit.
On Wednesday, all three executives referred to the absence of executives from U.S. companies that operate and sell groceries in Canada, such as Walmart and Costco.
“We compete against some of the toughest food retailers in the world including Walmart, Amazon and Costco, as well as a lot of other competition. That does not sound like an oligopoly to me,” Medline said.
“This is not a problem with too little competition. The problem is that there is a global product cost inflation.”
Alicja Siekierska is a senior reporter at Yahoo Finance Canada. Follow her on Twitter @alicjawithaj.
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Human Resources Officers must be very busy these days what with the general turnover of employees in our retail and business sectors. It is hard enough to find skilled people let alone potential employees willing to be trained. Then after the training, a few weeks go by then they come to you and ask for a raise. You refuse as there simply is no excess money in the budget and away they fly to wherever they come from, trained but not willing to put in the time to achieve that wanted raise.
I have had potentials come in and we give them a test to see if they do indeed know how to weld, polish or work with wood. 2-10 we hire, and one of those is gone in a week or two. Ask that they want overtime, and their laughter leaving the building is loud and unsettling. Housing starts are doing well but way behind because those trades needed to finish a project simply don’t come to the site, with delay after delay. Some people’s attitudes are just too funny. A recent graduate from a Ivy League university came in for an interview. The position was mid-management potential, but when we told them a three month period was needed and then they would make the big bucks they disappeared as fast as they arrived.
Government agencies are really no help, sending us people unsuited or unwilling to carry out the jobs we offer. Handing money over to staffing firms whose referrals are weak and ineffectual. Perhaps with the Fall and Winter upon us, these folks will have to find work and stop playing on the golf course or cottaging away. Tried to hire new arrivals in Canada but it is truly difficult to find someone who has a real identity card and is approved to live and work here. Who do we hire? Several years ago my father’s firm was rocking and rolling with all sorts of work. It was a summer day when the immigration officers arrived and 30+ employees hit the bricks almost immediately. The investigation that followed had threats of fines thrown at us by the officials. Good thing we kept excellent records, photos and digital copies. We had to prove the illegal documents given to us were as good as the real McCoy.
Restauranteurs, builders, manufacturers, finishers, trades-based firms, and warehousing are all suspect in hiring illegals, yet that becomes secondary as Toronto increases its minimum wage again bringing our payroll up another $120,000. Survival in Canada’s financial and business sectors is questionable for many. Good luck Chuck!. at least your carbon tax refund check should be arriving soon.
NORMAN WELLS, N.W.T. – Imperial Oil says it will temporarily reduce its fuel prices in a Northwest Territories community that has seen costs skyrocket due to low water on the Mackenzie River forcing the cancellation of the summer barge resupply season.
Imperial says in a Facebook post it will cut the air transportation portion that’s included in its wholesale price in Norman Wells for diesel fuel, or heating oil, from $3.38 per litre to $1.69 per litre, starting Tuesday.
The air transportation increase, it further states, will be implemented over a longer period.
It says Imperial is closely monitoring how much fuel needs to be airlifted to the Norman Wells area to prevent runouts until the winter road season begins and supplies can be replenished.
Gasoline and heating fuel prices approached $5 a litre at the start of this month.
Norman Wells’ town council declared a local emergency on humanitarian grounds last week as some of its 700 residents said they were facing monthly fuel bills coming to more than $5,000.
“The wholesale price increase that Imperial has applied is strictly to cover the air transportation costs. There is no Imperial profit margin included on the wholesale price. Imperial does not set prices at the retail level,” Imperial’s statement on Monday said.
The statement further said Imperial is working closely with the Northwest Territories government on ways to help residents in the near term.
“Imperial Oil’s decision to lower the price of home heating fuel offers immediate relief to residents facing financial pressures. This step reflects a swift response by Imperial Oil to discussions with the GNWT and will help ease short-term financial burdens on residents,” Caroline Wawzonek, Deputy Premier and Minister of Finance and Infrastructure, said in a news release Monday.
Wawzonek also noted the Territories government has supported the community with implementation of a fund supporting businesses and communities impacted by barge cancellations. She said there have also been increases to the Senior Home Heating Subsidy in Norman Wells, and continued support for heating costs for eligible Income Assistance recipients.
Additionally, she said the government has donated $150,000 to the Norman Wells food bank.
In its declaration of a state of emergency, the town said the mayor and council recognized the recent hike in fuel prices has strained household budgets, raised transportation costs, and affected local businesses.
It added that for the next three months, water and sewer service fees will be waived for all residents and businesses.
This report by The Canadian Press was first published Oct. 21, 2024.
TORONTO – A new report says many Canadian business leaders are worried about economic uncertainties related to the looming U.S. election.
The survey by KPMG in Canada of 735 small- and medium-sized businesses says 87 per cent fear the Canadian economy could become “collateral damage” from American protectionist policies that lead to less favourable trade deals and increased tariffs
It says that due to those concerns, 85 per cent of business leaders in Canada polled are reviewing their business strategies to prepare for a change in leadership.
The concerns are primarily being felt by larger Canadian companies and sectors that are highly integrated with the U.S. economy, such as manufacturing, automotive, transportation and warehousing, energy and natural resources, as well as technology, media and telecommunications.
Shaira Nanji, a KPMG Law partner in its tax practice, says the prospect of further changes to economic and trade policies in the U.S. means some Canadian firms will need to look for ways to mitigate added costs and take advantage of potential trade relief provisions to remain competitive.
Both presidential candidates have campaigned on protectionist policies that could cause uncertainty for Canadian trade, and whoever takes the White House will be in charge during the review of the United States-Mexico-Canada Agreement in 2026.
This report by The Canadian Press was first published Oct. 22, 2024.
