Largest grocers making more on food sales: competition watchdog

Canada’s grocery sector wants extra competitors to assist hold meals costs down and encourage new entrants, the nation’s competitors watchdog has discovered.

In a extremely anticipated research launched Tuesday, the Competition Bureau mentioned focus within the grocery business has elevated in recent times and the most important grocers have grown the quantity they make on meals gross sales.

Most Canadians purchase groceries in shops owned by a handful of grocery giants, with Canada’s three largest grocers — Loblaws, Sobeys, and Metro — collectively reporting greater than $100 billion in gross sales and $3.6 billion in earnings final yr, the research discovered.

“We saw Canada’s largest grocers’ food gross margins generally increase by a modest yet meaningful amount over the last five years,” it mentioned. “This longer-term trend pre-dates the supply chain disruptions faced during the pandemic and the current inflationary period.”

The Competition Bureau mentioned this alerts the necessity for extra competitors in Canada’s grocery business.

“Canada needs solutions to help bring grocery prices in check,” the research mentioned. “More competition is a key part of the answer.”

The competitors watchdog proposed 4 suggestions to enhance competitors and decrease costs, together with an innovation technique to assist new grocery companies and increase shopper selection.

It additionally recommends governments encourage the expansion of impartial grocers and the entry of worldwide grocers into the Canadian market, standardize unit pricing to assist Canadians simply examine grocery costs, and curb actual property practices within the business that restrict competitors, equivalent to placing covenants on bought land that forestalls any new grocer from working there.

Meanwhile, the Bureau mentioned it additionally must method its work within the grocery business with “heightened vigilance and scrutiny” to make sure Canadians profit from better selection and extra reasonably priced groceries.

“We need to thoroughly and quickly investigate allegations of wrongdoing, and we need the power to act when issues arise,” the research mentioned.

In a survey of shopper attitudes and opinions concerning the grocery sector, some Canadians mentioned the nation’s legal guidelines do not go far sufficient to cease offers which can be dangerous for competitors, whereas others felt the Competition Bureau has simply not performed a adequate job implementing these legal guidelines, the research mentioned.

When the Competition Act was launched in 1986, there have been not less than eight massive grocery chains throughout Canada, the research mentioned. Each was owned by a distinct firm.

Today there are 5 massive chains that function in Canada: Loblaw, Sobeys, Metro, Costco and Walmart.

The competitors watchdog dedicated to taking steps to higher promote competitors within the Canadian grocery business, together with offering a pro-competitive perspective to assist the implementation of Canada’s grocery code of conduct.

It additionally dedicated to revisiting the findings of its research in three years to evaluate the progress on suggestions it has made to authorities.

The extremely concentrated nature of Canada’s grocery’s sector has come below intense scrutiny in recent times.

The huge three grocery chains have been embroiled in an alleged bread price-fixing scheme, which observers say has triggered mistrust of the grocery business.

The massive grocers have additionally been accused of wage fixing after concurrently scraping pandemic bonuses for front-line employees.

It’s behaviour the House of Commons business committee likened to “cartel-like practices” in a June 2021 report.

Yet Canada’s grocers have argued that consolidation will increase efficiencies and gives customers with extra worth.

Grocery executives have vehemently denied accusations of worth gouging and so-called greedflation, saying their margins on meals have remained modest — regardless of hovering earnings.

Yet the House of Commons agriculture committee has floated the thought of a windfall tax on these earnings.

In a report on grocery affordability tabled earlier this month, it mentioned if the Competition Bureau finds proof that giant grocery chains are producing extra earnings on meals gadgets, the federal government ought to think about a windfall earnings tax to “disincentivize excess hikes in their profit margins for these items.”

Meanwhile, a grocery business committee is continuous to hammer out a brand new code of conduct that will assist stage the enjoying discipline between massive grocers, independents and suppliers.

Food costs have recorded an enormous spike in Canada since November 2021 — the final month for which grocery inflation was below 5 per cent.

Since then, grocery costs have persistently risen by near double digits, peaking at an 11.4 per cent year-over-year worth hike final September and once more in November earlier than easing considerably in latest months.

Statistics Canada mentioned Tuesday grocery costs rose 9 per cent yr over yr in May.

This report by The Canadian Press was first revealed June 27, 2023.