Independent grocers defend chains against food inflation accusations

An unlikely alliance between Canada's independent grocers and the country's three largest chains is forming amid accusations that grocery stores are to blame for higher food inflation.

Lawmakers took turns lambasting executives of Loblaw Cos. Ltd., Metro Inc. and Empire Co. Ltd. during a parliamentary hearing in Ottawa on Wednesday (March 8), accusing the retailers of driving up food prices to pad profits.

The allegations have prompted an often vocal critic of the chains to take the unusual step of defending the big grocers on the issue of food inflation.

"I'm no apologist for the chains by any means – we have lots of issues with them,'' Gary Sands, senior vice-president of public policy with the Canadian Federation of Independent Grocers, said in an interview on Thursday (March 9).

"But the independents are seeing the same supplier increases as the chains,'' he said. "The retailers at the end of the supply chain have become the focal point of everybody's angst about the rising price of food... but we know these factors are beyond their control.''

At issue are cost increases being passed along to grocers by food suppliers.

While suppliers may have previously sent one price increase a year, Sands said they're now raising prices two or three times a year – often by double digits.

Independent grocers are receiving the same staggering price increases from food suppliers that big chains are receiving, he said.

"There's just no business model in Canada that exists where you can't help but pass those increases on to your customer,'' Sands said.

Amid high food inflation, which hit 11.4% in January, Loblaw, Metro and Empire posted higher profits in the first half of 2022 compared with their average performance over the past five years, according to a Dalhousie University report.

Grocers argue that while their profits may have increased, their food margins have remained flat.

They say higher margins come from pharmacy, cosmetic and apparel sales, while overall sales have benefitted from consumers shifting spending away from restaurants toward groceries.

Galen Weston, chairman and president of Loblaw, told MPs on Wednesday that the company's profit amounts to about $1 for every $25 spent on groceries.

While Canadians are looking for someone to blame, Sands said rising food costs come from a confluence factors: the invasion of Ukraine, droughts and flooding, higher energy and labour costs, border disruptions and the Avian bird flu.

"We're all looking for a boogeyman to blame higher prices on and it doesn't exist,'' he said. "We can't even just blame suppliers, because their input costs are also rising.''

Meanwhile, Sands – a member of the committee creating a new grocery code of conduct – said he was pleased to see support for the code expressed by Loblaw, Sobeys and Metro.

"I look forward to hearing similar support from Walmart and Costco.''

The parliamentary committee unanimously approved a motion to invite executives of Walmart Canada and Costco Wholesale Canada to testify.

Sands said a significant portion of the grocery code of conduct is complete. The committee is still dealing with areas around adjudication, enforcement and governance, he said.