Amid high inflation, MPs should push grocer CEOs to disclose margins on food: experts

OTTAWA –

As members of Parliament gear as much as grill the CEOs of Canada’s largest grocery retailer chains, consultants say elected officers ought to push for extra transparency on why grocers are making a lot cash.

The CEOs and presidents of Loblaw Cos. Ltd., Metro Inc. and Empire Co. Ltd. — which operates chains together with Sobeys, Safeway and RecentCo — are set to testify earlier than the House of Commons agriculture committee on Wednesday as a part of its examine on meals inflation.

Sylvain Charlebois, director of the Agri-Food Analytics Lab at Dalhousie University, stated the upcoming assembly “is very much about political theatre.”

Other executives from the businesses have already testified in entrance of MPs, however New Democrats specifically signalled their dissatisfaction with the absence of the CEOs themselves.

“Those at the heads of these companies, where the buck stops, should at least have to answer questions around why their profits are so high and why their prices are so high,” NDP Leader Jagmeet Singh stated final month.

The proposal to listen to from the trade leaders got here from the get together’s agriculture critic, Alistair MacGregor, and it acquired unanimous help from Liberal, Conservative and Bloc Quebecois MPs on the committee.

With the grocers making document earnings amid excessive inflation, Charlebois stated MPs have a possibility to push for extra monetary data that might make clear what’s been driving earnings.

A report co-authored by Charlebois within the fall discovered the three grocers all posted greater earnings within the first half of 2022 in contrast with their common performances over the past 5 years.

Loblaw was significantly notable, the report discovered, because it had outperformed not solely its five-year common efficiency but additionally that of every of these years individually.

The grocery chain’s gross revenue within the first half of 2022 beat its earlier finest outcomes by $180 million — equal to about an additional million {dollars} a day, the analysis discovered.

And whereas Loblaw has stated its earnings have been pushed by non-food gadgets akin to its pharmacy merchandise, its monetary statements do not break down the margins for various classes of products.

“I think it’d be worthwhile for the committee to dig deeper into that data for all three companies,” Charlebois stated.

But the committee will not be capable of compel the businesses to launch extra details about their monetary outcomes, leaving the choice of what to reveal as much as grocers.

David Macdonald, a senior economist on the Canadian Centre for Policy Alternatives, stated the grocers could certainly be making their earnings off of non-food merchandise. But “we have no way to evaluate that because we can’t see any of that segmented information,” he stated.

And even when earnings are being pushed by lipstick or cleaning soap gross sales, Macdonald stated that should not essentially insulate the businesses from scrutiny.

Corporate earnings shot up considerably in 2021 and 2022, coinciding with the worldwide rise in inflation and fuelling accusations of “greedflation.” That across-the-board pattern deserves extra consideration, Macdonald stated.

Still, even supposing grocers see typically decrease margins, steep meals inflation has acquired specific consideration. Grocery costs have been up 11.4 per cent in January from the yr earlier than.

In October, the Competition Bureau introduced it’s enterprise a examine that may particularly have a look at whether or not competitors within the grocery sector is taking part in a task within the greater costs.

Macdonald stated MPs may ask the grocery CEOs whether or not they are going to decide to offering full entry to their monetary data to the Competition Bureau because it embarks on its examine.

Without such commitments, the bureau’s powers are “very limited,” he stated. “They can’t compel any additional information.”

A closing report is predicted in June, full with suggestions for the federal authorities. It may show “consequential,” Charlebois stated, including that the bureau may search adjustments to the legislation that may give it extra energy to handle competitors within the trade.

“I actually think that grocers fear some major changes to the Competition Act,” he stated

Charlebois stated it is troublesome to do properly within the meals distribution business in Canada, and interprovincial commerce obstacles are a significant problem. Such obstacles can cut back competitors, he stated, noting that grocery margins within the U.S. are decrease than these in Canada.

“If there’s something that committee should be focusing on, it’s … how do we increase the competition in Canada in order to help consumers?”

This report by The Canadian Press was first printed March 7, 2023.