Canada’s competition watchdog is launching a study to determine if the highly concentrated food industry is contributing to rising food prices.
“With inflation on the rise, Canadian consumers have seen their purchasing power decline,” the Competition Bureau said in a statement Monday.
“This is especially true when shopping for groceries. In fact, grocery prices in Canada are rising at the fastest rate in 40 years.”
Retail food prices in September rose at the fastest pace since 1981, with prices up 11.4% from a year ago. This compares to an overall inflation rate of 6.9%.
Although the inflation rate has fallen from its peak of 8.1% in June, food prices are outpacing the overall consumer price index and continuing to rise.
“Before, food price increases took a back seat to things like gasoline. Today, food prices in grocery stores are becoming one of the main drivers of inflation,” said David Macdonald, senior economist at the Canadian Center for Policy Alternatives.
Canada’s grocers have suggested in the past that consolidating the country’s food retail industry could increase efficiency and provide consumers with greater value.
But some grocery industry watchers say increased efficiencies don’t necessarily mean more affordable food.
“Consolidation can lead to more efficiency, but more efficiency doesn’t mean lower prices,” Macdonald said. “That could mean lower prices, but it could just as well mean higher profits and higher executive compensation.”
Many grocery chains and food and beverage companies have posted record profits during the pandemic and continue to post higher revenues, he said.
“It’s true that input costs are going up for these companies,” Macdonald said. “But so are their profits.”
The Competition Bureau said Monday that its study will examine the extent to which rising grocery prices relate to changing competitive dynamics in the sector.
He expects to explore how the government could act to combat grocery price increases through greater competition in the industry.
He noted that the grocery industry is concentrated, with many Canadians buying from one of three companies: Loblaw, Metro and Sobeys’ parent Empire Co. Ltd.
The lack of competition in the grocery retail industry has made it harder for small independent grocers, said Gary Sands, senior vice president of public policy for the Canadian Federation of Independent Grocers.
“The leverage that chains can exert in the market can put independents at a disadvantage,” he said. “When there were shortages during the pandemic, for example, there were instances where chains were stocked with product and…we had empty shelves.”
Sands asked how much can be changed retroactively.
“The horse didn’t just come out of the stable, he galloped off to another field,” he said.
The study will better position the Competition Bureau to assess proposed future mergers and acquisitions, but is unlikely to force changes on the grocery industry now, said Sylvain Charlebois, professor of distribution and Food Policy at Dalhousie University.
“The study is important and marks a necessary change in tone and style in the Office,” he said. “But I don’t expect it to change the industry. Will they ask Loblaw to get rid of Provigo or Sobeys to get rid of Safeway? »
Charlebois added: “That’s the structure we have. What is important is that the Bureau better understands the implications of the decisions that will be taken in the future.
Still, the mere threat of being investigated and consumers turning to big-box competitors like Walmart or Costco could spur grocers to act, observers say.
“The enforcement threat is often as effective as the enforcement,” Macdonald said. “They feel the heat. There’s been a lot of public pressure and we’ve seen grocers announce they’re freezing private label prices. »
The Competition Bureau will provide a series of recommendations to the government in its final report, which it expects to release in June.
Earlier this month, the House of Commons Agriculture Committee voted to investigate food prices.
The House of Commons also voted unanimously in favor of an NDP motion calling on the government to tackle “corporate greed” in the grocery sector.
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