The stream56:45The skyrocketing cost of food – and who or what is to blame
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With food prices soaring, Toronto resident Jason Gemmill is carefully planning his family’s meals a week in advance and using apps to sniff out bargains before even heading to the grocery store.
“I’ll go through the local flyer of the store we’re going to, and see what’s on sale there, and that informs the meal choices,” Gemmill said. The stream Matt Galloway.
“Once in a while there will be something out of the ordinary that we have to pay for, whatever the price, but usually it’s sales,” he said.
Gemmill and his wife both work and have a budget of $110 a week to feed themselves and their two children, ages 11 and 15.
while being accompanied by The stream during a recent shopping spree, he noticed the price increases on vegetable oil and meat. But even with a carefully planned shopping list, he had to put back the pepperettes he bought for his children’s lunch boxes because the price in store was higher than advertised.
“The app lied to me, we’re not going to buy these today. Since these are $11…double digits, that’s a bit too much for something like that, so we’ll skip that this week,” he said.
WATCH | Food prices in Canada continue to climb
Food prices continued to rise in September at an inflation rate of 11.4%, although Canada’s headline inflation rate slowed for the third consecutive month. Statistics Canada figures put food inflation at twice the headline inflation rate and the fastest rate of increase since August 1981.
Economist Jim Stanford said the price hike was due to several factors: supply chain disruptions during the pandemic; the impact of climate change on agriculture; and the effect of the war in Ukraine on energy prices.
“On top of all that, there’s a big layer of cream that the supermarkets themselves are collecting. Grocery retail profits are increasing very, very sharply compared to pre-COVID times,” said said Stanford, economist and director of the Center. for future work.
In the most recently completed quarter, Canada’s three largest grocery chains all posted profit increase of tens of millionscompared to the same period before the pandemic in 2019.
While not all of these profits came from food sales, the numbers bolstered the profiteering charges against Loblaw Companies Ltd. (which operates Loblaws, Zehrs, No Frills and Real Canadian Superstore); Metro Inc. (which owns Metro, Food Basics and other brands); and Empire Co., (owner of Sobeys, IGA, Safeway, Farm Boy, Foodland, FreshCo and other brands).
The stream repeatedly requested interviews with executives from Loblaw, Metro and Empire. All requests were denied.
Stanford said grocery chains are facing increased costs from manufacturers and suppliers, who are also showing increased profits on average. But he argued that some big grocery chains are “passing their costs — and more” on to consumers.
“I’m not saying their greed triggered the whole problem… but their greed is certainly present in the increased profits they are generating from this inflationary episode.”
“A cozy oligopoly”
Stanford has described the Canadian supermarket industry as “a cozy oligopoly” – or a market dominated by a small number of suppliers.
“Three large chains have a dominant market share, and they are able to exert pricing power both over consumers, but also over their own suppliers and their own workers,” he said.
WATCH | Are the grocery giants scamming us?
This kind of market concentration can often lead to higher prices, said Phoebe Stephens, assistant professor of food security and sustainable agriculture at Dalhousie University.
“When you have few players, companies can match others’ price increases rather than compete with them,” she said.
On October 17, the federal agriculture committee recently passed a motion calling for an investigation into grocery store profits – which could see the CEOs of the big three chains appear before the committee to answer questions.
On Monday, the Competition Bureau, Canada’s consumer watchdog, also announced that it investigate the sectorwith a view to recommending measures to improve competition in the sector.
The stream requested an interview with the Competition Bureau, but the request was denied, as was a request for an interview with Finance Minister Chrystia Freeland.
Why do we have the essentials of life in our economy priced according to the price at which a private company thinks it can sell it?-Jim Stanford
Simon Somogyi, professor and Arrell Chair in Food Business at the University of Guelph, said “it’s hard to say for sure” whether big chains have taken advantage of widespread inflation to charge customers more.
Understanding overall profitability would require looking at individual products, supplier costs and margins to understand the profit margins generated, he said.
“It’s not available in the public sphere and investigations should take place to see exactly what it is,” he said.
Somogyi isn’t convinced the Competition Bureau can make huge changes, but thinks it’s an opportunity to examine rising profits and the impact on consumers across many industries.
“Will the Competition Bureau be able to bring in more grocers? No. Will it be able to set prices for consumers? No,” he said.
“But it would be nice if he looked at the profitability of all types of businesses, because…it’s not just an isolated case. It’s a trend.”
WATCH | Competition Bureau to study rising grocery prices
Power to dissolve companies
Stanford said the surge in corporate profits as consumers struggle also raises bigger questions.
“The reality is that we have an economic system where we give private companies the power to charge whatever the market will bear. And some people think that’s natural and healthy. Some people think that’s greedy,” did he declare.
“I think we should be asking a fundamental question: why do we have life-sustaining prices in our economy based on the price at which a private company thinks it can sell it?”
He would like to see the powers of competition regulators strengthened, including “penalties for collusive behavior, but also even things like breaking up big companies that have too much power”.
He also wants to see people protected from inflation as it happens, keeping wages in line with rising prices and income support programs for low-income households.
And if necessary, through taxation, “take some of those profits and give it back to the consumers whose higher-than-normal payments account for those profits,” he said.
“I think there are a lot of different ways to go about it. None of them are easy, none of them are a silver bullet.”
With files from CBC Business. Audio produced by Amanda Grant, Anne Penman, Kate Cornick and Brianna Gosse.
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