A growing number of Canadians believe big grocery chains are profiteering from food inflation and unnecessarily pushing prices higher according to a new survey released Tuesday.
The survey, conducted by Agri-Food Analytics Lab at Dalhousie University, found that 30 per cent of Canadians think grocery chain price gouging is the main reason food prices have been rising in Canada. In Ontario, 31.7 per cent of respondents believed grocery chain price gouging was the main cause of high grocery bills.
Following testimonies at a parliamentary hearing last month by the heads of Canada’s three biggest supermarket chains — Loblaw CEO Galen Weston, Empire CEO Michael Medline and Metro CEO Eric La Flèche — only 25 per cent of Canadians who followed the proceedings felt grocers were transparent and forthcoming enough about the data they shared.
Consumer trust is critical for the food industry and a lot of that trust has plummeted in recent months, said Sylvain Charlebois, director of the Agri-Food Analytics Lab.
“The survey shows that grocers have a lot of work to do to regain the trust of the public,” Charlebois said.
The survey, which included nearly 10,000 respondents, comes as Canadians are experiencing the highest grocery inflation in 40 years while profits at the country’s three biggest grocers are at all-time highs.
Consumers over the last year have grown weary of skyrocketing grocery bills as prices continue to surge far past the “headline” inflation rate, rising by 10.6 per cent in February despite Canada’s annual rate of inflation falling to 5.2 per cent, Statistics Canada reported. Last summer, the Star published an investigation that found the country’s biggest three supermarkets had been increasing their profit margins as prices went up.
The three supermarket giants have rebuffed any allegations of price gouging. All three CEOs have pointed out that food inflation is lower in Canada than many other G7 countries, that costs have increased throughout the supply chain from farming to processing to transportation, and that margins at the supermarket chains are thin.
But still “the vast majority of Canadians aren’t convinced,” Charlebois said.
Grocery code of conduct
Profiteering isn’t the only factor Canadians are blaming for unreasonable food prices. In second place, nearly 30 per cent of Canadians believe monetary and fiscal policies are a major contributing factor to higher food prices.
“It’s interesting to see that a lot of people also think there are other factors at play here like inflation,” Charlebois said.
He added that respondents frequently brought up the lack of competition in the marketplace as a factor driving food costs higher.
Canada’s food retail market is highly consolidated with five leading retailers, including the country’s top three grocers, commanding more than 75 per cent of the market, according to a 2021 report from the United States Department of Agriculture.
“I think (the lack of competition) has been a major problem all along. We don’t have enough players in the marketplace,” Charlebois said. “It’s been cosy for grocers and I think they know that. And I think that the public realizes that as well.”
Shrinking competition further, small independent grocers are dwindling as it becomes more difficult to keep up with supermarket chains, rising rent and inflation. There are approximately 6,900 independent grocers in Canada, many of whom operate on overall margins of 1.5 to two per cent, meaning they’re making little profit, according to Gary Sands, senior vice-president of the Canadian Federation of Independent Grocers.
Independent grocers often have no choice but to buy grocery supplies directly from their competitors, Loblaw and Sobeys, which own the two biggest food wholesale distributors in Ontario. And big grocery chains have increasingly unilaterally imposed new or higher charges on suppliers, putting smaller grocers without the same clout at a disadvantage.
This spring, a Canadian grocery code of conduct is expected to be finalized by an industry steering committee, with the hopes that it will address the current imbalance of power caused by consolidation among the grocery retailers and increase “fair and ethical dealing” across the grocery supply chain in Canada.
The industry committee working on the grocery code was established in response to contentious fees being charged to suppliers by large grocery retailers.
A working draft of the grocery code, viewed by the Star, includes provisions that would prevent grocers or suppliers from unilaterally altering contracts — a sore point in recent years among industry players. It also lays out rules for fines and penalties and the fair allocation of supply when product availability doesn’t meet demand, a common issue during the pandemic.
“The code of conduct is addressing fairness and transparency, so hopefully that will lend itself to more trust within the industry,” Sands said. “If we want Canadians to trust our industry, we have to trust ourselves.”
With files from The Canadian Press
Ghada Alsharif is a Toronto-based business reporter for the Star. Reach Ghada via email: galsharif@torstar.ca
This content was originally published here.
