Is grocery power imbalance raising prices in Canada? Here’s what to know – National | 24CA News
Whether you’re catching a flight, opening a brand new checking account or choosing up groceries, a small group of massive names takes up a lot of the market share. Competition Ltd. is a Canadian Press collection that explores what this implies for merchandise – and costs – within the nation.
The flyer for the Victory Meat & Produce Market, a small grocer in New Brunswick, lately featured recent native turkey for $3.99 a pound, two luggage of carrots or onions for $4 and a bunch of celery for $2.29 – costs that rival its nationwide rivals.
For 81 years, the unbiased retailer has supplied high quality merchandise at inexpensive costs, incomes it a loyal buyer base regardless of the rising dominance of nationwide grocery chains.
“We have long-term relationships with suppliers and local growers, and staff that have been here for 20 years,” mentioned Alex Scholten, co-owner of the Fredericton retailer. “Our customers are like family and I think those relationships are what has sustained us for so long.”
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The mom-and-pop type business has turn out to be more and more uncommon in Canada’s extremely consolidated grocery {industry}.
Alex Scholten, co-owner of the Victory Meat & Produce Market Ltd., is proven at his retailer in Fredericton, Monday, April 10, 2023. For 81 years, the unbiased retailer has supplied high quality merchandise at inexpensive costs, incomes it a loyal buyer base regardless of the rising dominance of grocery shops chains.
THE CANADIAN PRESS/Stephen MacGillivray
Loblaw, Sobeys and Metro make up greater than half of all meals retail gross sales in Canada, based on the Who’s Who 2022 report by {industry} commerce journal Canadian Grocer.
Add Walmart and Costco to the tally, and simply 5 firms management three-quarters of grocery gross sales throughout the nation, the report discovered.
That market focus has come beneath intense scrutiny in current months as meals costs elevated at their quickest clip in 40 years.
All 5 firms have confronted accusations of profiteering, with executives summoned to testify earlier than a parliamentary listening to in Ottawa the place they have been grilled by MPs about greater grocery payments.
The grocery executives denied the accusations, telling MPs that their margins on meals are low.
“The truth is we are at the end of a very long food supply chain that has economic inputs at every step and stage,” Empire president and CEO Michael Medline mentioned to the committee in March.
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The federal competitors watchdog has individually launched a research into grocery retailer competitors in Canada, questioning whether or not “competition factors” _ along with excessive climate, greater enter prices, Russia’s invasion of Ukraine and provide chain disruptions _ may very well be affecting the worth of meals. The Competition Bureau plans to publish its findings in June.
The research comes as Ottawa conducts a long-promised evaluate of Canada’s competitors legal guidelines, one which strives to “make life more affordable for Canadians,” Innovation Minister Francois-Philippe Champagne mentioned when the evaluate was launched in November.
Yet in the case of groceries, simply how a lot consolidation and competitors points affect the worth of milk, bread or greens is sophisticated.
While Canada’s grocery sector is extremely concentrated, it’s additionally very aggressive, mentioned Michael von Massow, a meals economic system professor on the University of Guelph in Ontario.
“I would argue that consolidation provides economies of scale,” he mentioned. “I know the view that there’s value in size is unpopular … but it probably helps prices. We have a very competitive consumer market for food.”
The present mistrust of grocers seemingly stems partly from Canada’s bread price-fixing scandal, von Massow mentioned.
In 2017, George Weston Ltd. and Loblaw Companies Ltd. revealed that each participated in an industry-wide bread price-fixing association for over a decade.
Canada’s competitors watchdog alleged in court docket paperwork in 2018 that a minimum of $1.50 was artificially baked into the worth of a loaf of bread in the course of the 16-year bread-price-fixing conspiracy involving the nation’s largest bakery wholesalers and grocery retailers.
The Competition Bureau says its investigation into bread price-fixing is ongoing.
The scandal has given Canadians good cause to be skeptical about the reason for excessive meals costs _ particularly as grocers publish vital income, von Massow mentioned.
“We feel the pinch at the grocery store,” von Massow mentioned. “We’re looking for someone to blame and that’s who’s charging us more.”
But meals inflation is because of numerous inflationary pressures that have an effect on your complete provide chain, he mentioned.
Indeed, Fredericton’s Victory Meat & Produce Market has seen prices rise kind of on par with the massive grocers.
Transportation, utilities, meals and labour prices have all soared over the past couple of years, Scholten mentioned.
The retailer works laborious to maintain prices low, however Scholten mentioned costs have nonetheless gone up.
While extra competitors within the grocery sector could be factor, he mentioned it won’t make that a lot of a distinction with costs.
“It’s just the environment we’re in right now,” Scholten mentioned. “Everybody is facing significant cost increases.”
Still, Canada’s huge grocery chains reap the benefits of their measurement and probably even interact in uncompetitive behaviour, von Massow mentioned.
“I think where they’re leveraging that market power is back up the supply chain to suppliers,” he mentioned. “It can make it tough for smaller, independent grocers to compete because they can’t buy as well.”
Indeed, one of many keys to Victory’s success is its wholesale business.
“We offer both retail and wholesale products, so we’re able to build a volume that’s sufficient enough to give us the buying power to compete with much bigger competitors,” Scholten mentioned.
Michael Graydon, CEO of provider {industry} group Food, Health & Consumer Products of Canada, mentioned there are each advantages and downsides to focus in meals retail.
“The grocery market is consolidated, there’s no question about that,” he mentioned. “There are some benefits. They are very sophisticated retailers with a robust supply chain, so getting products from the manufacturers to distribution to store tends to be fairly efficient.”
It’s additionally simpler promoting to 5 firms moderately than 25 for some suppliers, he mentioned.
But there are downsides as nicely, Graydon mentioned.
“There is a power imbalance and this is fundamentally why we’re working toward a code of conduct,” he mentioned.
The industry-led Canadian grocery code is predicted to be launched within the coming weeks.
The doc is predicted to extend “fair and ethical dealing” throughout the grocery provide chain in Canada, based on a draft model of the code seen by The Canadian Press.
“It establishes some rules for engagement,” Graydon mentioned. “It takes away a lot of that unilateral decision-making and imposing terms on manufacturers without negotiations.”
But the disadvantage of levelling the taking part in subject between grocers and suppliers may very well be even greater costs, von Massow mentioned.
If you restrict the diploma to which grocers can put strain on suppliers, he mentioned it might take cash out of the grocers’ pockets.
“They’re either going to eat that _ and it will have no impact on prices _ or they’re going to pass at least some of it on to consumers,” von Massow mentioned.
