Grocers facing government pressure, concerns if this will lead to change

In March 2023, executives from Canada’s three largest grocery companies paid a visit to Parliament Hill.

Michael Medline, Galen Weston and Eric La Flèche had been summoned before a House of Commons committee to answer questions about their companies’ rising profits. Facing MPs, they denied accusations of raising prices beyond what inflation warranted.

“It doesn’t matter how many times you say it, write it or tweet it. It simply is not true,” said Medline, the president and CEO of Sobeys parent company Empire.

Canadian politicians have been trying to tackle grocery prices, which have risen significantly in just a few years amid overall inflation and higher interest rates.

But experts say politicians are oversimplifying a complicated issue in an effort to look like they’re meaningfully addressing food inflation, when in reality they have limited tools at their disposal to influence retail prices.

“There is a little bit of political theatre going on here,” said Michael von Massow, a food economy professor at the University of Guelph.

Food inflation in Canada has cooled from its heights, but grocery prices have still risen by more than 22 per cent in four years, according to Statistics Canada, and Canadians are looking for where to point the finger.

A survey by Leger earlier this year found almost 30 per cent of Canadians believe food inflation has been primarily caused by grocery stores trying to increase profit margins. Another 26 per cent think it’s mostly due to global economic factors, while one in five blame the government.

Von Massow and Monica LaBarge, an assistant professor at Queen’s University studying food access and consumer well-being, both said grocery prices are a sensitive topic for consumers, as they’re a frequent and necessary expense that can’t be avoided.

Public pressure has risen on the government to act, said LaBarge, and that’s translating into political pressure on the entities many blame for food inflation.

Besides hauling grocery executives in front of MPs, the government has called on grocers to make plans to stabilize prices; strengthened the competition watchdog’s powers to investigate companies; and established a task force it says will monitor the grocers’ work on price stabilization.

Recent heightened scrutiny of grocers extends beyond Canadian borders. Other countries, such as Australia, France, and the U.S., have also been singling out retailers in efforts to address grocery prices.

Consumers are seeking the causes of food inflation, von Massow said, and there are many of them. But politicians are looking for easy answers.

“The truth is, there is no silver bullet here,” he said.

For the NDP, the focus has largely been on corporate profits, said von Massow, noting the party has advocated for a price cap on grocery store staples. It was NDP leader Jagmeet Singh who bore down on Loblaw’s Galen Weston at the meeting in March last year, repeating, “How much profit is too much profit?”

For the Conservatives, the carbon tax is a major talking point when it comes to food prices, said von Massow, while for the Liberals, there’s a focus on competition — industry minister Francois-Philippe Champagne has said he’s seeking a foreign grocer to enter the Canadian market.

The Competition Bureau last year released a report saying the grocery sector needs more competition to help “bring grocery prices in check.” And with its new powers granted by the Affordable Housing and Groceries Act, the bureau has launched an investigation into grocers’ use of allegedly anti-competitive real estate clauses.

Both von Massow and LaBarge said that despite the focus on competition in Canada and abroad, there are also potential price benefits to consolidation.

“From a purely academic perspective, having a larger organization that has more buying power in the market and so has better ability to negotiate with suppliers should provide lower prices to consumers,” said LaBarge.