Canada’s grocery sector needs more competition to help keep food prices down, give shoppers more choice and encourage new entrants, the country’s competition watchdog says.
In a highly anticipated study released Tuesday, the Competition Bureau said concentration in the grocery industry has increased in recent years and the largest grocers have increased the amount they make on food sales.
Most Canadians buy groceries in stores owned by a handful of grocery giants, with Canada’s three largest grocers — Loblaws, Sobeys, and Metro — collectively reporting more than $100 billion in sales and $3.6 billion in profits last year, the study found.
Food gross margins have generally increased over the last five years by a “modest yet meaningful” amount of one or two percentage points, the Competition Bureau said.
“This longer-term trend predates the supply chain disruptions faced during the pandemic and the current inflationary period,” it said.
That’s roughly equivalent to $1 to $2 on each $100 that Canadians spend on groceries, the study found.
The regulator said this signals the need for more competition in Canada’s grocery industry.
“Canada needs solutions to help bring grocery prices in check,” the study said. “More competition is a key part of the answer.”
The competition watchdog proposed four recommendations to improve competition and lower prices, including an innovation strategy to support new grocery businesses and expand consumer choice.
It also recommends governments encourage the growth of independent grocers and the entry of international grocers into the Canadian market, standardize unit pricing to help Canadians easily compare prices, and curb real estate practices in the industry that limit competition, such as putting covenants on sold land that prevents any new grocer from operating there.
Gary Sands, senior vice-president of public policy with the Canadian Federation of Independent Grocers, said the study recognizes that more needs to be done to support independent grocers in Canada.
“They’ve drawn attention to some of the challenges that are faced by independent grocers,” he said. “There are a lot of barriers to entry that make it hard to compete with the chains and this will hopefully lead to some changes.”
Karl Littler, senior vice-president of public affairs with the Retail Council of Canada, said the study proves that major grocery chains have not made an excessive profit on food.
“We see this as another nail in the coffin of the greedflation hysteria,” he said, referring to allegations that higher prices during the pandemic have been due to grocery chains engaged in price gouging and so-called greedflation — raising prices by more than the rate of inflation.
However, the Bureau said its inability to compel information as part of the study limited its access to some details and highlighted the need for more formal information-gathering powers.
It said it also needs to approach its work in the grocery industry with “heightened vigilance and scrutiny” to ensure Canadians benefit from greater choice and more affordable groceries.
“We need to thoroughly and quickly investigate allegations of wrongdoing, and we need the power to act when issues arise,” the study said.
In a survey of consumer attitudes and opinions about the grocery sector, some Canadians said the country’s laws don’t go far enough to stop deals that are bad for competition, while others felt the Competition Bureau has just not done a good enough job enforcing those laws, the study said.
When the Competition Act was introduced in 1986, there were at least eight large grocery chains across Canada, the study said. Each was owned by a different company.
Today there are five large chains that operate in Canada: Loblaw, Sobeys, Metro, Costco and Walmart.
The competition watchdog committed to taking steps to better promote competition in the Canadian grocery industry, including providing a pro-competitive perspective to support the implementation of Canada’s grocery code of conduct.
It also committed to revisiting the findings of its study in three years to assess the progress on recommendations it has made to government.
The concentrated nature of Canada’s grocery’s sector has come under intense scrutiny in recent years.
The big three grocery chains have been embroiled in an alleged bread price-fixing scheme, which observers say has triggered distrust of the grocery industry.
The large grocers have also been accused of wage fixing after simultaneously scrapping pandemic bonuses for front-line workers.
It’s behaviour the House of Commons industry committee likened to “cartel-like practices” in a June 2021 report.
Yet Canada’s grocers have argued that consolidation increases efficiencies and provides consumers with more value, even as their profits have climbed.
The House of Commons agriculture committee has floated the idea of a windfall tax on those profits to “disincentivize excess hikes in their profit margins for these items.”
Meanwhile, a grocery industry committee is continuing to hammer out a new code of conduct that would help level the playing field between large grocers, independents and suppliers.
Food prices have recorded a massive spike in Canada since November 2021 — the last month for which grocery inflation was under five per cent.
Since then, grocery prices have consistently risen by close to double digits, peaking at an 11.4 per cent year-over-year price hike last September and again in November before easing somewhat in recent months.
Statistics Canada said Tuesday grocery prices rose nine per cent year over year in May.
This report by The Canadian Press was first published June 27, 2023.
Companies in this story: (TSX:L, TSX:EMP.A, TSX:MRU)
TOKYO (AP) — Japanese technology group SoftBank swung back to profitability in the July-September quarter, boosted by positive results in its Vision Fund investments.
Tokyo-based SoftBank Group Corp. reported Tuesday a fiscal second quarter profit of nearly 1.18 trillion yen ($7.7 billion), compared with a 931 billion yen loss in the year-earlier period.
Quarterly sales edged up about 6% to nearly 1.77 trillion yen ($11.5 billion).
SoftBank credited income from royalties and licensing related to its holdings in Arm, a computer chip-designing company, whose business spans smartphones, data centers, networking equipment, automotive, consumer electronic devices, and AI applications.
The results were also helped by the absence of losses related to SoftBank’s investment in office-space sharing venture WeWork, which hit the previous fiscal year.
WeWork, which filed for Chapter 11 bankruptcy protection in 2023, emerged from Chapter 11 in June.
SoftBank has benefitted in recent months from rising share prices in some investment, such as U.S.-based e-commerce company Coupang, Chinese mobility provider DiDi Global and Bytedance, the Chinese developer of TikTok.
SoftBank’s financial results tend to swing wildly, partly because of its sprawling investment portfolio that includes search engine Yahoo, Chinese retailer Alibaba, and artificial intelligence company Nvidia.
SoftBank makes investments in a variety of companies that it groups together in a series of Vision Funds.
The company’s founder, Masayoshi Son, is a pioneer in technology investment in Japan. SoftBank Group does not give earnings forecasts.
Shopify Inc. executives brushed off concerns that incoming U.S. President Donald Trump will be a major detriment to many of the company’s merchants.
“There’s nothing in what we’ve heard from Trump, nor would there have been anything from (Democratic candidate) Kamala (Harris), which we think impacts the overall state of new business formation and entrepreneurship,” Shopify’s chief financial officer Jeff Hoffmeister told analysts on a call Tuesday.
“We still feel really good about all the merchants out there, all the entrepreneurs that want to start new businesses and that’s obviously not going to change with the administration.”
Hoffmeister’s comments come a week after Trump, a Republican businessman, trounced Harris in an election that will soon return him to the Oval Office.
On the campaign trail, he threatened to impose tariffs of 60 per cent on imports from China and roughly 10 per cent to 20 per cent on goods from all other countries.
If the president-elect makes good on the promise, many worry the cost of operating will soar for companies, including customers of Shopify, which sells e-commerce software to small businesses but also brands as big as Kylie Cosmetics and Victoria’s Secret.
These merchants may feel they have no choice but to pass on the increases to customers, perhaps sparking more inflation.
If Trump’s tariffs do come to fruition, Shopify’s president Harley Finkelstein pointed out China is “not a huge area” for Shopify.
However, “we can’t anticipate what every presidential administration is going to do,” he cautioned.
He likened the uncertainty facing the business community to the COVID-19 pandemic where Shopify had to help companies migrate online.
“Our job is no matter what comes the way of our merchants, we provide them with tools and service and support for them to navigate it really well,” he said.
Finkelstein was questioned about the forthcoming U.S. leadership change on a call meant to delve into Shopify’s latest earnings, which sent shares soaring 27 per cent to $158.63 shortly after Tuesday’s market open.
The Ottawa-based company, which keeps its books in U.S. dollars, reported US$828 million in net income for its third quarter, up from US$718 million in the same quarter last year, as its revenue rose 26 per cent.
Revenue for the period ended Sept. 30 totalled US$2.16 billion, up from US$1.71 billion a year earlier.
Subscription solutions revenue reached US$610 million, up from US$486 million in the same quarter last year.
Merchant solutions revenue amounted to US$1.55 billion, up from US$1.23 billion.
Shopify’s net income excluding the impact of equity investments totalled US$344 million for the quarter, up from US$173 million in the same quarter last year.
Daniel Chan, a TD Cowen analyst, said the results show Shopify has a leadership position in the e-commerce world and “a continued ability to gain market share.”
In its outlook for its fourth quarter of 2024, the company said it expects revenue to grow at a mid-to-high-twenties percentage rate on a year-over-year basis.
“Q4 guidance suggests Shopify will finish the year strong, with better-than-expected revenue growth and operating margin,” Chan pointed out in a note to investors.
This report by The Canadian Press was first published Nov. 12, 2024.
TORONTO – RioCan Real Estate Investment Trust says it has cut almost 10 per cent of its staff as it deals with a slowdown in the condo market and overall pushes for greater efficiency.
The company says the cuts, which amount to around 60 employees based on its last annual filing, will mean about $9 million in restructuring charges and should translate to about $8 million in annualized cash savings.
The job cuts come as RioCan and others scale back condo development plans as the market softens, but chief executive Jonathan Gitlin says the reductions were from a companywide efficiency effort.
RioCan says it doesn’t plan to start any new construction of mixed-use properties this year and well into 2025 as it adjusts to the shifting market demand.
The company reported a net income of $96.9 million in the third quarter, up from a loss of $73.5 million last year, as it saw a $159 million boost from a favourable change in the fair value of investment properties.
RioCan reported what it says is a record-breaking 97.8 per cent occupancy rate in the quarter including retail committed occupancy of 98.6 per cent.
This report by The Canadian Press was first published Nov. 12, 2024.
