In a letter from the committee, Ottawa urges both retailers to voluntarily comply with the proposed grocer’s code of conduct or risk facing legislative action.

In other words, Canada is on the verge of adopting a government-coordinated, industry-led mandatory code — a development that heralds good news for Canadians, though many may not yet realize its significance.

Unprecedented unity among all political factions underscores the grocer’s code of conduct as a pivotal tool for stabilizing food prices over time. This code aims to furnish food companies with a safe harbour for dispute resolution through a designated secretariat, offering an alternative to the current norm in which companies have no recourse but to endure unfavourable conditions.

Its focus is not on dictating prices but on ensuring fair contractual practices for all entities involved, including startups, farmers and small family-owned food processors, thereby offering much-needed financial predictability to suppliers.

The industry, plagued by unilateral decisions and broken agreements by grocers, stands to gain from the equitable playing field this code promises.

The code’s introduction might seem paradoxical to staunch free-market advocates and conservatives who typically view government intervention with skepticism. Companies like Walmart and Loblaw, having achieved their market dominance through strategic decisions, are often celebrated for their success. However, the issue at hand transcends their accomplishments.

The food industry is distinct for two primary reasons. It operates on razor-thin margins across the entire supply chain, necessitating meticulous planning and coordination. Secondly, the power dynamics are skewed, with suppliers paying substantial fees to grocers for the privilege of doing business with them.

It doesn’t work that way in other sectors. This dynamic has given grocers significant gatekeeping power, influencing the market to their advantage.

This dominance has not only stifled competition but has also marginalized independent grocers, particularly affecting Canadians in smaller towns by limiting their access to nearby stores.

The upward trend in grocery fees, primarily driven by Loblaw and Walmart, exacerbates the challenges for suppliers and independent grocers alike.

It’s crucial to understand that the code’s goal is not to reduce prices — such expectations would be fanciful — but to mitigate price volatility, a pervasive issue that overshadows the more fundamental problem of food inflation.

While higher prices are concerning, it’s important to recognize food inflation as a normal economic phenomenon, essential for businesses to thrive and ensure the safety of food products.

Achieving a food inflation rate of 1.5 to 2.5 per cent is ideal. This is a range last seen in the summer of 2021 and is anticipated to return by year’s end, according to Canada’s Food Price Report forecast.

Price volatility, exacerbated by increased grocery fees and the manipulation of prices around blackout periods, remains a significant concern if the aim is to reduce price volatility. Although the code may not eliminate these practices, it is poised to reduce their impact on retail food prices significantly.

Moreover, the code promises greater transparency within the food chain. An annual report by the secretariat, detailing compliant companies and highlighting those failing to adhere, introduces an unprecedented level of accountability in Canada’s food industry.

While the grocer’s code of conduct may initially seem counterintuitive, its benefits for consumers, suppliers, and the overall market cannot be overstated. It represents a step toward a more equitable and stable food industry in Canada.

Sylvain Charlebois is professor of food distribution and policy at Dalhousie University and senior director of the Agri-Food Analytics Lab.

– Sylvain Charlebois is professor of food distribution and policy at Dalhousie University and senior director of the Agri-Food Analytics Lab.

The post Opinion: The emerging consensus on food prices appeared first on Alberta Farmer Express.

One particular individual, an economist seemingly more interested in grabbing headlines and camera attention to boost fundraising and personal interests, made bold claims about “record and excessive profits” in the grocery sector for 2023.

The term “excessive profits” has become a favourite slogan for those seeking to foster animosity toward businesses.

However, it’s crucial to note that his argument relied on Statistics Canada data, which encompasses convenience stores and specialty stores in its dataset, not solely the major grocers. The sensationalized $6 billion figure quickly circulated in the news, causing considerable harm.

The facts indicate that gross margins, a valuable metric for assessing whether a company overcharges for its goods, will remain at 3.4 per cent, consistent with the five-year average for Loblaw, Empire and Metro.

Regrettably, we shouldn’t expect an apology from this economist. He seems intent on misleading Canadians, insisting that profits should continue to rise due to inflation, all the while resorting to attention-grabbing headlines and fearmongering tactics. This was a reprehensible misuse of a platform to advance a political, anti-corporate agenda — utterly disappointing and disingenuous.

Loblaw also made some questionable claims during a visit to Ottawa concerning the potential impact of a grocer’s code of conduct. The company admitted on Dec. 23 that the Australian example cited by its CEO, Galen Weston, to justify the company’s refusal to sign the code of conduct, was inaccurate.

At that time, Weston expressed concerns to federal officials that the current code of conduct could potentially increase food prices by $1 billion, arguing that, in Australia, the third party responsible for enforcing the code favoured suppliers seeking higher prices, which would harm consumers. None of these claims held.

At least Loblaw eventually acknowledged its error, albeit on Dec. 23, when most of us were preoccupied with holiday preparations.

Leaving aside Loblaw’s failed attempt to obstruct the industry’s efforts to implement a more disciplined and fair code of conduct, Ottawa’s primary focus should be on fostering competition. Providing consumers with more choices and making the Canadian food market more attractive to external investors is essential.

The code of conduct should be a non-government, third-party-led mechanism enabling companies to resolve disputes related to contractual terms rather than pricing per se.

Currently, as grocers unilaterally raise listing and marketing fees imposed on suppliers, the manufacturers, in turn, increase prices to offset these higher fees set by grocers. This results in a cycle that ultimately impacts consumers, often without their awareness.

This is the only way food prices can become more stable over time. In countries like Ireland, Australia and the United Kingdom, where such a code exists, food price increases, adjusted for inflation between 2013 and 2023, have been negative, whereas Canada’s food price increase adjusted for inflation over a decade was 8.9 percent.

While a code of conduct may not entirely curb food inflation, it will help the industry coordinate vertically and address market turbulence, which is often triggered by factors like climate change and geopolitics, leading to price volatility and sticker shocks.

Ottawa should compel all parties, including those who oppose the code like Loblaw and Walmart, to adhere to the code of conduct. That should be the shared goal of all Canadians for 2024.

Sylvain Charlebois is professor of food policy and distribution at Dalhousie University, and senior director of the Agri-Food Analytics Lab.

The post Loblaw’s gaffe and apology appeared first on Alberta Farmer Express.

Politicians, and even some knowledgeable economists, have convinced many that Canadian grocers have taken advantage of the recent inflationary cycle to profit unfairly. Despite compelling data and many reports pointing to the contrary, many Canadians remain convinced of this narrative.

Jim Stanford, an economist known for commenting on food prices, is the most recent example of how Canadians seem to be embracing arguments against food companies without questioning their validity. Stanford recently claimed that net profits for grocers in 2023 would surpass $6 billion for the first time, a statement that gained significant attention and raised the ire of politicians and many Canadians.

The media largely accepted these claims as fact without delving into the source of the data.

It’s important to note that the figures provided came from Statistics Canada, rather than corporate financial statements, which arguably would be more reliable. Statistics Canada’s Table 33-10-0225-01, which was used for the $6 billion argument, can include convenience stores, specialty food stores and not just major grocers.

Net profits are not a suitable metric to consider unless the intention is to sensationalize the issue of profiteering. To assess whether a grocery chain is indeed profiteering, one can look at gross profit margins, calculated as revenues minus the cost of goods sold.

It’s worth mentioning that the gross profit margins for our major grocers have remained relatively stable over the past five years, based on data from their financial reports.

Now, let’s also examine profits, a topic that politicians often emphasize. The combined net profit for the three major Canadian grocery chains (Loblaw, Sobeys, and Metro) in the past 12 months amounted to $3.808 billion. It is highly unlikely that this figure will exceed $6 billion in the current year, as claimed earlier this week.

To reach such profits, these chains would need combined revenues totalling $110.6 billion over the past year. When considered as a percentage of total sales in the last 12 months, the combined profits represent only about 3.4 per cent, which is an incredibly modest return. Additionally, this figure includes non-food items like cosmetics and prescription drugs, which typically have higher profit margins.

In essence, though, there is nothing inherently wrong with profits, and in a functioning economy, companies should report increased profits annually due to inflation. Canadians should understand this. People’s salaries increase, the prices of goods and services rise, and naturally, net profits increase in dollar terms. This is why it is critical to analyze percentages over time for a more comprehensive assessment.

In 2023, emotions seemed to overshadow a proper understanding of the food business world and food supply chain economics among many Canadians. Blaming the food industry has been, and continues to be, a convenient diversion for politicians, diverting attention away from the real issues impacting inflation, such as public overspending and fiscal policies, among others.

However, grocers are not without blame. Beyond profiteering, the industry has some challenges to address. Regulatory compliance has been an issue, and the bread price-fixing scandal has certainly tarnished the industry’s reputation.

While it’s true that some level of greed exists in the food industry, as in any economic system, it can also be taken to an extreme.

Our grocery chains in Canada are well-managed, but it is also important to note that profit margins in other countries like the United Kingdom and the United States are about half of what they are here. While acknowledging that the evidence of profiteering in Canada is weak at best, there is a need for more competition in the market.

François-Philippe Champagne, the federal minister of innovation who is on a mission to increase competition, has called upon other grocers abroad to invest in Canada. However, the challenge lies in making Canada an attractive destination for investment, which cannot be achieved without a mandatory code of conduct that levels the playing field between the major grocery chains, independent grocers, and suppliers alike.

Right now, players like Loblaw and Walmart have way too much influence and are dictating supply chain rules, a dimension consumers don’t necessarily see. It’s been like that for a while now.

With a well-defined mandatory code of conduct, Canadians may have to wait a considerable amount of time before witnessing the entry of new grocery players into the Canadian market.

– Sylvain Charlebois is professor of food distribution and policy at Dalhousie University and senior director of the Agri-Food Analytics Lab.

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Sadly, that’s exactly what transpired in our country this year, and it was both absurd and embarrassing. The government and Parliament relentlessly hounded grocers, drowning out the opportunity for Canadians to truly comprehend the intricacies of food inflation amid the cacophony of political theatrics.

The recent “greedflation” campaign, while amusing, highlights a collective amnesia regarding why companies exist and the power of market forces. The sustainability of the grocery business in Canada hinges on profits and a profound understanding of market dynamics.

In 2023, grocers made three visits to Ottawa. On March 8, they appeared in Parliament, followed by a meeting with Minister Francois-Phillippe Champagne on Sept. 18, and a final appearance in Parliament in November.

Regrettably, these visits yielded little more than media photo ops that pleased industry critics. And it’s not over. More visits are coming.

The notion of compelling competitors to divulge sensitive pricing data is baffling. Such an approach contradicts the very essence of a competitive marketplace. It’s akin to gathering all NHL hockey teams in a room to share their winning strategies or, worse yet, asking teams to tie every game and assign goal quotas to players like Connor McDavid. It’s simply senseless.

Many politicians this year have demonstrated a limited grasp of the fundamental principles governing competitive markets. In a genuinely competitive market, centralized coordination among market participants is non-existent, period.

Ottawa’s inclination toward direct market intervention runs counter to the principles necessary for encouraging increased investment and enhancing market competitiveness.

While the bread price-fixing episode was undoubtedly wrong and disgraceful, there’s a genuine concern that the government’s actions may inadvertently foster re-emergence of similar schemes. Ottawa seems to be drifting closer to a government-coordinated effort that leaves many, including analysts and some backbenchers, deeply uncomfortable.

Let’s hope that 2024 ushers in more reason and tranquillity for both the industry and the government, though the polls will ultimately decide.

As much as we acknowledge that grocers deserve scrutiny like any other sector, 2023 was a nadir in our history. Consumer trust is at an all-time low, not necessarily due to the industry itself but because it has been weaponized for political gain.

Despite this, we should be grateful to our grocers for their unwavering commitment to feeding Canadians and providing one of the most affordable and safest food baskets globally, even if some politicians have conveniently forgotten or chosen to ignore this fact.

Amid this turbulent year, it’s crucial to remember that the grocery industry plays an indispensable role in every Canadian’s daily life. These businesses have continuously adapted to challenges, ensuring that store shelves remain stocked, offering a lifeline of sustenance during uncertain times.

As 2024 approaches, let’s hope for a more collaborative and understanding relationship between the industry and the government, one that empowers the market and prioritizes the well-being of Canadian consumers.

It’s time to move beyond theatrics and focus on practical solutions that benefit everyone.

– Sylvain Charlebois is professor of food policy and distribution at Dalhousie University, and senior director of the Agri-Food Analytics Lab.

The post Opinion: Let’s give the grocery theatrics a rest in 2024 appeared first on Alberta Farmer Express.

The 32-year-old Toronto-based single mom says this isn’t the only way rising food costs have affected her over the last year.

“It’s really affected what I make and how I cook, and it’s taken the joy out of it as well,” she says. “I don’t want to spend that much money on ingredients.”

Clark is not alone.

According to a recent report from the Canadian Centre for Food Integrity, food costs were the top life concern for Canadians this year for the fifth year in a row, and many people have changed their grocery shopping and cooking habits accordingly.

“Over half of Canadians indicate that they are very concerned about this issue, and that level has increased a significant three points compared to last year,” Ashley Bruner, the centre’s research manager, said at a recent conference in Mississauga, Ont. It also ranked higher than concerns about inflation, health care and housing prices.

Concerns related to the cost of energy and the national economy have fallen from the top five since last year.

Although concern about the overall cost of food has been increasing significantly over the past few years, concern about the affordability of food has grown at an even steeper rate.

As Canadians feel the pinch of other economic factors such as inflation, interest rates and housing prices, food is seen as expensive and increasingly unaffordable.

This year’s Canada Food Price Report also estimated that food prices in Canada will continue to rise by five to seven per cent, translating into an extra $1,065 in food costs, on average, for a family of four.

Last year, food cost increases were higher, according to the report, with jumps of 10.8 per cent in Alberta, 10.3 per cent in Saskatchewan and 10.7 per cent in Manitoba.

Though a report published earlier this year showed Canada ranked second lowest in the world for food inflation rates, many Canadians feel discouraged by consistent jumps in costs. According to the CCFI report, only a quarter of respondents felt that Canadian food was among the most affordable in the world.

University of Saskatchewan professor Stuart Smyth, who was involved in creating the Canada Food Cost 2023 report, said the mainstream media isn’t giving Canadians a global context for food inflation, although he’s not sure that would have much of an impact on morale.

“Knowing food inflation in Canada is low compared to other countries provides little to no comfort to consumers,” he said. “Consumers want answers as to why food prices continue to rise in Canada.”

However, there are no simple answers. Reasons involve myriad factors, in Canada and globally, that have varying rates of impact and can change relatively quickly.

“As an expert whose job it is to stay on top of these issues and factors, I find it challenging to be consistently up to date on these multiple factors,” said Smyth. “It would take a great deal of time and effort for the average consumer to develop a good grasp of the economic complexities that contribute to food inflation.”

The CCFI report found that Canadians are equally as overwhelmed.

While 41 per cent of respondents said they believed rising costs were due to supply chain issues, another 34 per cent believed they were due to businesses prioritizing profits, compared to 20 per cent last year. Only seven per cent connected higher food prices to world conflict and labour shortages and six per cent with severe weather events.

Bruner says given the complexity of the situation, it’s not surprising that the report showed only a quarter of Canadians feel their food is the most affordable in the world.

“And that’s an opinion that’s been worsening, a significant six points compared to 2019,” she said.

Smyth said that number is a win for the food industry.

“This is higher than I would have estimated. This shows that one in four Canadians is listening to the food industry’s messaging and that if the food industry continues providing this information, hopefully a greater percentage of Canadians will become aware of this,” he said.

In light of rising costs and concerns about affordability, Canadians have adapted their food habits, the CCFI report found. They are buying more frozen food, adapting recipes, changing grocery stores and eating less meat. Consumers also reported switching to plant-based meat in an effort to save money.

For consumers such as Clark, cost has superseded all other factors at the grocery store. She said she no longer buys organic eggs, instead favouring bulk packages from Costco.

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