Canada’s largest grocer has announced a price freeze on its low-cost product line, amid accusations of profiteering during a worsening of cost of living crisis – and a looming parliamentary investigation into the food retail industry.
Inflation figures on Wednesday showed that grocery prices in the country rose 11.4% over last month, continuing a surge not seen in more than four decades.
Energy and housing costs have soared in recent months, but Canadian political leaders have focused their most pointed attacks on the country’s three grocery companies, calling out their increased profits amid high inflation.
Earlier this week, Loblaw Companies – which owns more than 20 grocery and supermarket chains – said it would lock in the prices of its ‘no name’ house brand, which includes more than 1,500 grocery items, until 31 January 2023.
Company president Galen Weston framed the move as a way of temporarily shielding customers from the effects of inflation, writing that costs were “maddeningly” out of his control.
“Many Canadians are struggling right now and it was important for a grocer to show some empathy towards the public,” said Sylvain Charlebois, a professor of food distribution and policy at Dalhousie University. “But it came about a month too late and on the day parliament decided to vote on an investigation into inflation.”
Others dismissed the move as a publicity stunt.
“This announcement has confirmed that supermarkets do have leeway in setting prices. They are not just the innocent middleman forced to pass on higher input costs to consumers and they actually make strategic decisions about prices and what the market will bear,” said Jim Stanford, an economist and director of the Centre for Future Work.
Rival grocery chain Metro dismissed the Loblaw’s move as an “industry standard”. Metro did not immediately announce that it would follow suit, but the mere suggestion that it could prompted accusations of potential price fixing in a country where the largest grocers have previously admitted to colluding on bread pricing for more than a decade.
“It absolutely confirms what we already know about the grocery business – it’s a cozy oligopoly,” said Stanford. “Explicitly or implicitly, the three big chains that dominate the industry in Canada cooperate all the time – not just on setting consumer prices, but in setting prices for suppliers and access for suppliers, and of course, setting wages for workers.”
Loblaw Companies didn’t respond to a request for comment from the Guardian on the timing of the announcement, but told Canadian media outlets in a statement their decision to freeze prices was “unprecedented”.
In 2018, the country’s competition bureau found grocers and bread companies colluded to fix prices, resulting in millions in fines.
The country’s three major grocery chains (two of which are controlled by billionaire families) provoked more anger in 2020 when they pledged to offer frontline workers a “hero’s pay” raise during the coronavirus pandemic – only to end the program just a few months later.
New Democratic party leader Jagmeet Singh has emerged as the industry’s sharpest critic, alleging it is driven by “greedflation”.
“Just a reminder – the top three grocery stores reported total net profits of $2.3bn in 2022 so far. That’s $228m more than the year before – $228m that they took from YOU as a consumer,” tweeted Singh. “CEOs are using inflation to cover up their greed.”
Singh also wrote it was “no coincidence” that Loblaws made its announcement shortly before parliament voted unanimously to hold hearings into corporate profits – including the grocery industry.
“The pressure is working,” he tweeted.
One economist argued said that grocery stores have benefited from the pandemic and from inflation – but not in the way the public often suspects.
“Complex issues are often grossly oversimplified by politicians,” said Trevor Tombe, a professor at the University of Calgary. “And complex problems require much more nuanced policy responses.”
Tombe points to the industry’s profit margins, which have slipped in the most recent quarter.
The explanation behind the recent surge in profits that incensed lawmakers, he said, is the fact that people are buying more groceries. Higher costs have changed spending patterns, meaning people are cutting back on certain luxuries – like eating out at restaurants. Instead, they’re buying more groceries.
Tombe said the poor optics of the industry – a history of admitted collusion and the fact that billionaire families control the country’s largest grocery chains – doesn’t help.
“Inflation is one of these large, global complex issues, right, and it’s not something that’s going to be solved by pointing the finger at grocery retailers.”
Stanford disagrees.
“Supermarkets are very profitable. This is not a skin-of-the-teeth operation,” he said, adding that profits have doubled since the beginning of the pandemic.
“They’ve taken advantage of the unique circumstances in the pandemic, to fatten their margins. Part of that is the desperation people felt when you couldn’t get toilet paper or other basic items in short supply.”
But he and Tombe agreed the grocery industry receives disproportionate attention and scrutiny, amid surging profits from energy companies.
“There’s a symbolic visibility to grocery shopping because we’re there so often. And we should be pointing fingers at the other places that are even worse,” said Stanford. “But that doesn’t mean we shouldn’t look at the grocery supermarkets.”
