Saturday March 11, 2023 | LANGFORD, BC
Overview by Mary P Brooke, B.Sc. | Island Social Trends
Consumers & politicians may not be giving the corporate grocery sector enough credit for realizing the magnitude and importance of what they do for every household. Food being on store shelves rests on their shoulders. ~ Mary P Brooke, Editor, Island Social Trends
Consumers across Canada have had a few days to digest the presentations by major Canadian grocery store Chief Operating Officers (CEOs) as happened in Ottawa last Wednesday.
The responses on March 8 by the CEOs of Loblaw Companies Ltd (Galen Weston Jr), Empire Company Limited (Michael Medline) and Metro Inc (Eric La Flèche) essentially refuted any price gouging that has colloquially become to be called ‘greedflation’.
Weston and Medline were in the room, while La Flèche participated remotely. They were speaking at the House of Commons Agriculture and AgriFood Committee, which got high-profile live TV coverage and plenty of comment and debate in social media.
Wide-spread interest is no surprise: the cost of food impacts every person and every household as well as food-related businesses (e.g. restaurants, product suppliers) and the institutional sector (e.g. hospital cafeterias, school food programs, etc).
Disruption of food availability can of course have longer-term impacts on people’s health and family stability.
Profit, margins and reliability:
While there is no question that large grocery store companies are aiming to make a good profit, that’s not a surprising revelation. Companies have shareholders who get dividends and top executives who get bonuses. These are the incentives by which they are enticed to take on the risk and pressures that they do.
These major corporations deliver reliability in the food sector — both for producers to get their products to market and for consumers to know there will always be food on grocery store shelves. These corporate giants seem to realize the role they play in people’s lives including food producers; Medline in particular emphasized how their suppliers are called ‘team members’. With some deeper economic analysis, Medline proposed that today’s business world is a “kinder capitalism than it used to be”, adding that people are treated fairly.
There was the mention of pensions that large corporations must cover for their retired employees, as part of the cost factor of food that ends up on the household table. “A lot of people have pensions. Profits and dividends support that,” said Medline.
The broad scale and scope of the grocery supply sector and retail distribution system is a comfort zone that every Canadian want to pause and reflect upon — food is always available in convenient and reliable ways.
It’s also a time to reflect upon how and where that food is grown locally (local farmers, urban community gardens and one’s own backyard), as part of a backup emergency source of food.
Of particular note here on Vancouver Island, only about three percent of food consumed here is grown on the island. If transport by ferries, air and trucking were interrupted there would be noticeable impacts on grocery store inventory.
Inflationary pressure on households:
Meanwhile, every household is feeling the pressure of increasingly high food prices. As seen in the latest economic figures (January 2023) the rate of food inflation is 10.4% (calculated on an annual basis in January of 2023 — therefore comparing to January 2022).
That’s the highest food price increase since 1981 (10.1% in January 1981 compared to January 1980), as prices accelerated both for grocery stores and restaurants.
The food inflation rate is almost double the overall inflation rate in Canada which in January sat at 5.9% (the lowest since February 2022 and below market expectations of 6.1%, slowing from the 6.3% in the previous month).
To see inflation going down recently is mostly due to lower transportation costs (5.4% in January vs 6% in December), amid lower inflation for passenger vehicles and a slight deceleration for gasoline prices. The Consumer Price Index also slowed for shelter (6.6% vs 7%) as eased costs for accommodation expenses and homeowners’ replacement offset higher mortgage rates due to tightening by the Bank of Canada (the central bank rate was pushed up steadily from 0.25% in March 2022 to 4.5% in January 2023).
The Bank of Canada’s blunt tool to either raise or lower their prime interest rate hurts those who can least afford financial shock… as seen at the grocery store, but also in the overall cost for individuals and businesses to carry credit (mortgages, lines of credit, and credit cards) which spills further into household and business financial distress.
As BC Premier David Eby often reminds, the pressures on the cost of everything are driven by global headwinds (including supply chain interruptions by the war in Ukraine, and backups at ports due to pandemic-related or other labour shortage reasons). His government has tried to buffer the pain of global inflation by providing affordability credits (one back in January and another BC Affordability Credit coming up in April).
Corporate grocery profit not necessarily from food:
Weston clearly indicated that the Shoppers Drug Mart chain within Loblaw is where the largest profiles are happening, perhaps even shoring up the razor-thin margins that have been the reality for grocery sector for many years. A public relations effort for a few months over the year-end holiday season was a stark reminder that grocery pricing is intensely managed.
Grocery retail in particular has a complex range of expenses and customer expectations. Many grocery stores offer loss leaders to attract customers in, meanwhile at least providing the opportunity for people to get the basics (like milk, bread and some canned foods).
“Loblaw is making money on lipsticks & drugs, not as much on food. But 80% of Canadians believe grocers are gouging even if they’ve never looked at one single balance sheet, not one,” said Dr. Sylvain Charlebois, Agri-Food Analytics Lab, Dalhousie University March 11 on Twitter at @FoodProcessor. However, that’s asking a lot, for consumers to study the financial spreadsheets of large corporations. People of course feel the pinch (more than a pinch for many) at the grocery store each week, and it’s causing discomfort, frustration and perhaps extreme distress.
Industry input costs drive up food costs:
During the CEO session last week, NDP Leader Jagmeet Singh (who bumped the NDP’s own Food Critic Alistair MacGregor, MP who is a regular member of the Agriculture and AgriFood Committee) accused corporate CEOs of putting their own well-being (and that of their companies) ahead of consumers who are inarguably struggling with steady food cost increases.
Singh brought along to the committee meeting a stack of printed-out consumer comments about the impact of food prices.
Medline said “anything will increase the cost to consumers” while outlining the various input costs (e.g. labour, freight, fuel) to providing products to retail grocery store shelves. The impact of extreme weather on food growers might be included in that list as well.
Weston says milk in his stores sells below cost every single day.
Weston pointed out that “we buy and sell products and negotiate for lowest prices”. On some occasions there have been “some unjustified price increases from suppliers” which Loblaw has tried to minimize the impacts of those “poor judgments” on the prices pushed through to consumers.
Among many other things, the large corporate grocers informs smaller grocery retailers of product prices, so that once foods reach the grocery store shelves the prices can have been included in the flyers and online promotions that consumers use for comparison shopping. Much advance planning goes into all of that.
Next set of CEOs:
The CEOs of American-based corporations that sell food in Canada have been summoned to appear at the House of Commons Agriculture and AgriFood Committee in future. That includes Walmart, Costco and Amazon. It could be speculated that the massive might of these companies won’t take a dent from anything they might hear from a committee in Canada.
===== RELATED ARTICLES by ISLAND SOCIAL TRENDS:
Three grocery CEOs to address federal agriculture committee (Feb 26, 2023)
Small bank rate increase is still an economic shock (Jan 25, 2023)
Growing your own food in inflationary times (July 3, 2022)
Elxn44 ESS candidates: food sustainability on Vancouver Island (Sept 12, 2021)
===== ABOUT ISLAND SOCIAL TRENDS:
Island Social Trends is a professional news service that covers news of the west shore of Greater Victoria on south Vancouver Island, as well as BC-wide and national issues. Editor and publisher is Mary P Brooke, B.Sc., Cert PR.
Island Social Trends launched entirely online at islandsocialtrends.ca in mid-2020, in the footstep of its predecessor publications MapleLine Magazine (2008-2010), Sooke Voice News (2011-2013) and West Shore Voice News (2014-2020).