By Karl Littler

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Opinion: Competition Bureau report puts grocery 'greedflation' to rest Back to video

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The Competition Bureau’s just-released report on the grocery industry should be the final nail in the coffin of the “greedflation” campaign against Canada’s grocers. In a period of understandable consumer angst about rising food prices, political opportunists have pointed the finger at the grocery industry, first on rising food costs and later pivoting to accusations grocers were padding their margins on the back of inflation.

The fallacy of the “greedflation” story has been in plain sight for months. Statistics Canada put out a study last November that attributed food price inflation to its multiple global causes, with no suggestion Canada’s grocers were taking advantage of the situation.

More recently, the Bank of Canada found that while retailers (of whom grocers are a huge component) have passed on increases from their suppliers dollar-for-dollar, there is no indication they have increased their own margins along the way.

And specific to grocery profits, Canada’s leading food research institute has found the same thing: Sylvain Charlebois of the Agri-Food Analytics Lab at Dalhousie University has stated that grocery “greedflation” is a myth and said he “failed to see any evidence of profiteering on all accounts.”

The “greedflation” narrative should have been put to rest by the House of Commons Agriculture Committee, which held hearings and issued its own report earlier this year. It attributed food inflation to global phenomena: war in Ukraine, spiking costs for feed, fuel and fertilizer, supply chain interruptions and climate events. It also declined to offer any examples of or data on grocers increasing their margins.

But instead of doing the right thing and declaring the smear dead, the committee chose to pass the hot potato, recommending that: “If the Competition Bureau finds evidence in its upcoming market study that large grocery chains are generating excess profits on food items, the Government of Canada should consider introducing a windfall profits tax.”

Which brings us to this week’s report. Far from finding that grocery profits are “excessive,” the bureau states repeatedly that grocers’ profits are “modest.”

Grocery has always been a high-volume, low-margin business and so it remains. Over time, with a growing population and price inflation occurring earlier in the food chain, nominal dollars spent on groceries are going to increase. But the profit percentages remain the same.

The Canadian grocery market has always welcomed competition, as it did when Costco and Walmart entered. Canadian consumers, especially in urban and suburban settings, have diverse choices for grocery purchases from grocers of varied sizes and formats. Canada’s grocery market share for the top five players is comparable to the market shares in France, Germany, United Kingdom, and Italy. U.S. market concentration is lower nationally, but that’s for a population of 330 million. Regions with similar populations to Canada’s, like Southern California or Florida, have similar or higher levels of concentration.

The bureau’s report (at p. 36) indicates that foreign grocers may be holding off because they see how aggressively Canadian grocers compete on price and because Canada already has a well-established discount-grocer market share. It’s something of a paradox: more competition could result in lower prices, but foreign grocers aren’t raising their hands to enter our market because Canadian grocers already compete so fiercely on price.

In sum, every competent, independent body that has looked at these issues over the past year has debunked the greedflation smear, some doing so quite specifically. And on the other side of the issue? Crickets. When it came time to issue the AGRI report, the opportunists who did so much grandstanding last year shied away from offering any evidence.

Let’s do the responsible thing and declare the greedflation smear officially dead. And, along with it, taxation of “excess profits” in the grocery business. It has always been absurd to suggest that grocery margins in the range of two to four per cent are excessive. Publicly available quarterly reports show that low grocer margins pale in comparison to the margins of other consumer-facing industries in Canada, as well as to those of most players earlier on in the food supply chain.

Instead, let’s focus on the inflation challenge and its root causes and on issues of food insecurity. Grocers do so daily. Policy-makers should, too.

Karl Littler is senior vice-president for public affairs at Retail Council of Canada.