Groceries & Greed: Assessing and Responding to the Role of Corporate Profit in Rising Grocery Prices
“Supermarket” by Donna Lee
While inflation continues to hurt Canadians’ wallets across the board, nowhere is it being felt heavier than at the grocery store. In February, Statistics Canada reported that food inflation had risen at faster rates than general inflation for 13 consecutive months. A recent study from Dalhousie University found approximately three-quarters of Canadians adapted their food purchasing patterns in 2022 in response to inflation. Additionally, Toronto’s Daily Bread food bank reported a record-breaking 1.68 million visits between April 2021 and March 2022, a period in which grocery prices were significantly less inflated than they have now become. Such examples highlight the particularly tangible nature of inflation in the food industry and its immediate effects on consumers, all of whom require food to survive.
While disease outbreaks, supply chain disruptions stemming from COVID-19, and the war in Ukraine have all been recognized as major causes of inflation, in the past few months a new potential culprit has emerged: corporate greed. Jagmeet Singh, leader of the federal New Democrat Party (NDP), has accused Canada’s major grocery chains––who control approximately 59% of the market––of deliberately profiting from rising food prices. As the Federal Competition Bureau’s investigation into inflation in grocery stores continues, the Federal Government must prepare to take action to protect Canadians from monopolistic grocery chains’ greed.
On March 8th, leaders of Loblaw, Empire, and Metro, the three largest grocery chains in Canada, appeared before Parliament to answer questions from the House’s agriculture committee on why food prices continue to skyrocket. All three leaders declared accusations of corporate profiteering to “false”, citing the global prevalence of rising food prices. Galen Weston, CEO of Loblaw, repeated a sentiment that has become a mainstay of Loblaw’s social media accounts, that for every $25 grocery bill, Loblaw’s profits just $1.
Yet, while these chains continue to deny the role of profiteering in rising food prices, their quarterly profits show evidence that this may not be entirely true. In December, the Toronto Star released a report demonstrating that Loblaw––the largest of the three––had increased its quarterly gross profit for seven straight years. Empire’s data shows six consecutive quarters of year-over-year profit increases, including its biggest profits ever in the first three quarters of 2022. Still, in parliament and in press releases, chains continue to blame any increase in profits on increasing demand for non-food items, like Loblaw’s clothing and banking divisions.
Keeping with the big three’s narrative that corporate profit is not at play in rising food prices, in the previous winter, Loblaw introduced a highly-publicized, temporary price freeze for essential items from its value-focused brand, No Name. This initiative was welcomed by many and may have played a crucial role in aiding many Canadians’ food security despite lasting only three months.
It is important to note that this was the only deliberate initiative taken by Loblaw to put its consumers ahead of its profits. Metro was quick to respond to Loblaw’s publicization of the price freeze by informing Canadians that holiday price freezes were standard practice amongst grocery chains. Additionally, prices were frozen at already grossly inflated levels, representing only a pause in ongoing inflation rather than a brief return to pre-inflation prices.
While Canadians must recognize that grocery chains are far from solely responsible for increasingly expensive grocery bills, these chains’ claims that they are merely “passing along” price increases deserve greater scrutiny. For example, data from Statistics Canada shows that while grocery profit margins have not increased especially in the past year, they jumped from an average of 1.7% from 2017 through 2019, to an average of 2.7% between 2020 and 2023.
Economist Angela MacEwan has argued that these profit margin increases have been facilitated by the monopolistic nature of Canada’s grocery industry. The big three grocery companies own the majority of their competitors. When Canadians try to “punish” a chain like Sobey’s for unaffordable food by shopping at an alternative like Foodland or IGA, they continue to make profits for Empire, which owns all three stores. Such a reality becomes increasingly problematic for Canadians considering it is food that is at stake. Here, the option of simply going without a certain good until it becomes affordable again is no longer an option. If Canadians can no longer afford a certain food item, it will simply be substituted with a different food item, likely bought from the same three grocery chains.
While the Competition Bureau continues to investigate the role of rising profits in food inflation, the Federal Government must be prepared to act. Should corporations like Metro or Loblaw be found to have unfairly preyed upon vulnerable Canadians, at a time when inflation has affected nearly every facet of consumption, they must be punished swiftly and powerfully. International charity Oxfam has called for governments to create windfall taxes on grocery corporations that have profited excessively amidst inflation. This comes in part from its own analysis of these profits which found that, of the 95 companies it studied, 84% directed excessive profits to shareholders while passing on rising input prices to consumers.
Portugal has already imposed a windfall tax of 33% on excessive profits in its food industry. The tax will directly benefit struggling Portuguese, who have been involuntarily funding these excessive profits, through direct investment into welfare programs. While Prime Minister Trudeau has previously decried windfall taxes on the inflation-heavy grocery and energy sectors as “simplistic” and ineffective, such a tax could significantly benefit the Canadians who have been forced to make greater sacrifices to put increasingly expensive food on the table. Additionally, Canada has already recently imposed a windfall tax of 15% on the banking sector for profits from 2021, demonstrating that such a policy would not be unprecedented.
As the Federal Government seems poised to reduce spending ahead of an expected economic slowdown, the results of the Competition Bureau’s research could represent not only an opportunity to help struggling Canadians but also a chance to garner critical votes. With the Liberals polling consistently sluggishly, Trudeau should be excited at the possibility of generating revenue at the expense of an industry that voters already believe to be profiting excessively off of inflation.