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Writer-s-Bloc

Canada’s Competition Bureau finally takes a stand on food pricing

Food pricing in Canada

The recent move by Canada’s Competition Bureau to investigate the parent companies of grocery giants Loblaws and Sobeys marks a significant step in addressing anticompetitive behaviour in the retail grocery sector.

Its investigation, initiated on Mar. 1, focuses on their alleged use of property controls, which purportedly restrict competition through their lease agreements and control over land vacancies. With these two companies holding a combined market share of over 50 percent in the Canadian food retailing market, the potential implications are substantial.

According to Federal Court records, the Commissioner of Competition’s inquiry centres on suspicions that Loblaws and Sobeys are using their property controls to limit the activities of potential tenants, thereby reducing competition.

This is of particular concern in rural areas where communities often have limited grocery options, making them especially vulnerable to such practices. The allegations suggest that these companies are not only controlling who can lease space in shopping centres but also holding onto vacant lands to prevent competitors from entering the market. Sobeys’ parent company has responded by calling the inquiry “unlawful,” reflecting the tension and defensiveness within the industry.

However, many observers are not surprised by these developments, as the grocery sector has long been criticized for its market control tactics. The investigation underscores a broader issue: the control of market access and the strategic importance of location in the grocery business. These companies have mastered the art of location optimization, ensuring their dominance by strategically positioning and protecting their stores.

The public’s frustration with the grocery industry has been building, partly due to the long-running bread price-fixing scandal that has plagued both the industry and the Competition Bureau. After nine years, the investigation remains unresolved, eroding public trust. The current investigation into Loblaws and Sobeys is a crucial opportunity for the Bureau to demonstrate its commitment to protecting consumers and ensuring fair competition.

Within the grocery industry, there is a prevailing belief among executives that their practices are justified, driven by the need to maximize profits and serve customers. These practices have become normalized over decades, making it challenging to shift industry culture. However, the current food security crisis in Canada, highlighted by a poor rating from Food Banks Canada, has made the public less tolerant of actions that limit their access to affordable food options.

The Competition Bureau’s role is akin to law enforcement in ensuring market fairness. Just as speed limits and police patrols keep roads safe, the Bureau’s oversight is essential to prevent anticompetitive practices in the grocery sector. For the Bureau to regain public trust, it must complete this investigation swiftly and transparently, with clear recommendations made public. This will signal to both the industry and consumers that the Bureau is actively policing the market.

While the public needs to be educated about the complexities of the food industry, it is equally crucial for grocers to recognize that they are dealing with a more informed and less tolerant consumer base. The Competition Bureau’s investigation is a necessary step in aligning industry practices with public expectations and ensuring a fair and competitive market.

This shift begins with robust oversight and decisive action from the Bureau.

Sylvain Charlebois is senior director of the agri-food analytics lab and a professor in food distribution and policy at Dalhousie University.

This article is written by or on behalf of an outsourced columnist and does not necessarily reflect the views of Castanet.



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Want lower food prices? Be careful what you wish for

Impact of low food prices

Many Canadians understandably desire lower food prices. However, what often goes unnoticed are the long-term consequences of such reductions. These lower prices may ultimately compromise our food security.

We are examining a significant shift toward food disinflation in Canada since January 2023, when food inflation reached an apex of over 11%. Currently, the inflation rate in grocery stores has moderated to less than 2% and is projected to dip below 1% by the summer. This phenomenon mirrors a broader global trend that reverses the steep food inflation observed over the past 18 months.

Globally, food inflation rates now suggest that escalating food prices are becoming a less pressing concern. For example, Germany, which experienced a dramatic peak at nearly 22% just 14 months ago, now reports a food inflation rate of only 0.15%, indicating that prices have largely stabilized. Similarly, in France, food inflation stands at 1.2%, and in the U.S., it is 2.2%.

In most developed countries, the control of food inflation signals potentially good news for consumers worldwide. While some critics attribute higher food prices to the greed within the food industry, it was in fact global factors that were largely responsible, and their effects are evidently diminishing.

Despite these trends toward stabilization, many Canadians continue to harbour hopes for food-price reductions of 15% to 20% to levels seen pre-COVID. Such expectations are not only undesirable but quite reckless. The financial framework of the entire food supply chain has fundamentally changed — wages have risen, along with the costs for packaging and all materials required for the distribution and transportation of food. General inflation does not discriminate, impacting every sector, including the food industry, from farm gate to store. Restaurants are experiencing these impacts more acutely than retail outlets, with menu prices continuing to rise by as much as 5%, a trend that could persist.

Nevertheless, some food prices in Canada are decreasing, a trend that has been evident for a few months. Statistics Canada is likely to confirm this in the coming weeks. This reduction is the break many consumers have been anticipating amid rising mortgage rates and debt burdens, leading to approximately 15% less spending at the grocery store compared to last year. In response, Canadians have opted to trade down wherever possible when purchasing food. Lower prices in certain categories provide much-needed relief for those significantly struggling.

By the end of the year, deflationary pressures may become evident in grocery stores, potentially resulting in the average food basket costing less compared to last year. Such trends are not unprecedented in Canada, which experienced a negative food inflation rate from October 2016 to May 2017, and briefly in 1992.

While these developments may be welcomed by consumers, they spell less favourable conditions for the food industry. Deflationary cycles may compel companies to divest, curb their innovative ambitions, and focus solely on operational essentials. Growth aspirations, which help the sector expand, allow consumers access to new products and enhanced quality.

However, concerns about how grocers will maintain their financial health should not cause undue alarm. Even if revenues decline, major retailers like Loblaw are likely to maintain their bottom line by increasing pressure on suppliers. The real challenge will be faced by manufacturers, who will encounter greater demands from grocers to finance potential losses through higher fees and price squeezes.

Although Canadians might take issue with these practices, the costs are significant over time. As the erosion of food manufacturing progresses, so does our capacity to support farmers and control our supply chain, protecting ourselves from major macroeconomic forces like currency wars and fluctuations in energy costs. For instance, Grupo Bimbo, a major bread manufacturer, recently closed its plant in Levis, Quebec. This closure is part of a broader trend, with at least three other food manufacturing plants shutting down in Canada in the last six months, echoing similar events in 1992 and 2017. More closures are likely on the horizon.

While lower prices may be appealing, a weakened domestic food-supply chain could have far-reaching consequences. Given the complexities of food distribution in Canada, caution is advised regarding desires for significantly lower food prices.

Sylvain Charlebois is senior director of the agri-food analytics lab and a professor in food distribution and policy at Dalhousie University

This article is written by or on behalf of an outsourced columnist and does not necessarily reflect the views of Castanet.



The hidden cost of food inflation—compromising safety for affordability

Food safety vs. cost

The intersection of rising food costs and consumer health safety is emerging as a critical issue in today’s economy.

Recent research from Dalhousie University’s Agri-Food Analytics Lab, in partnership with Caddle, provides alarming insights into how financial pressures are influencing food safety behaviours among Canadians, with significant public health impacts.

The study surveyed 9,109 Canadians, revealing that 58% of respondents are more inclined to eat food near or beyond its “best before” date due to economic pressures from rising food prices. This trend is not marginal but indicative of a broad shift in consumer behaviour driven by financial necessity.

Alarmingly, 23.1% of these individuals consistently consume such foods, and an additional 38.6% do so frequently.

This risky behavior has direct health consequences: 20% of those surveyed reported sickness related to consuming food products past their “best before” date.

The data becomes even more concerning among Millennials, where 41% have experienced foodborne illnesses under similar circumstances. This demographic detail not only underscores the vulnerability of younger consumers but also highlights a generational divide in risk exposure and financial stability.

Despite these results being self-reported, the figures are alarmingly high.

Approximately 50.1% of Canadians acknowledge inflation has forced them to compromise on food safety, adopting strategies like freezing perishables or extending the usability of leftovers beyond typical safety margins. While these practices are resourceful, they can potentially lead to an increase in foodborne diseases, a concern substantiated by the reported incidences of illness.

The implications of these findings extend beyond individual households, suggesting a systemic issue that intertwines economic policies with public health outcomes.

Although food spending at the grocery store has decreased compared to 2018 and 2019, possibly indicating Canadians are wasting less food at home, this may also imply they are taking greater risks with their health.

As Canadians adjust their eating habits to cope with financial pressures, the need for enhanced risk communication policies and informing the public about how to manage risks at home is more critical than ever. The Canadian Food Inspection Agency suggests about four million Canadians contract a foodborne illness each year, a number that this report suggests may rise as food inflation becomes a widespread issue.

Food in Canada is generally safer compared to other nations. However, the consumer remains the most critical risk manager within the entire supply chain. While expiry dates are non-negotiable, “best before” dates do not mean “bad after.”

Nevertheless, consumers must carefully assess whether a product is safe to eat, considering their ability to cope with potential risks. Making the wrong decision could result in missing work and incurring additional costs.

Perhaps someday consumers will have access to home technology that can detect the safety level of the food they are about to eat in real time?

This research from Dalhousie University highlights an urgent need for policies that address the interplay between economic pressures and public health, emphasizing the necessity of robust consumer education on food safety in times of economic strain.

Sylvain Charlebois is senior director of the agri-food analytics lab and a professor in food distribution and policy at Dalhousie University.

This article is written by or on behalf of an outsourced columnist and does not necessarily reflect the views of Castanet.



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The high cost of living affecting Canadians’ ability to access healthy food

High cost of food

Canada appears to be a “trading-down” market, a trend that may persist for some time.

Recent data from Statistics Canada on the food retail and service industries and fresh GDP figures paint a dismal picture, especially for those looking to attract more food companies or grocers to our country.

Our population grew by over three percent last year, yet our GDP increased by less than one percent. While other industrialized economies, such as France and Germany, are experiencing worse economic headwinds, Canada’s economy is highly integrated with the United States, the world’s most robust economy at present.

Despite our proximity to this economic superpower, the benefits of our geography seem to have stalled. The most alarming aspect of the January GDP numbers is that Canada’s hottest economic sector is currently the public service, while private investments have stalled, primarily due to higher interest rates.

The gap in GDP per capita between Canada and the U.S. has widened by 106 percent since 2015, and this trend shows no signs of reversing. In other words, despite our growing population, Canada is becoming poorer, not richer.

For those in the food business, this is certainly not good news. Statistics Canada’s reports on food and service sales confirm that consumers are less wealthy while facing higher food and menu prices. As of January 2024, the average Canadian spends $248 a month on food retail sales per capita, down from $258 in January 2023 to $282 in February 2017. These figures are all in real dollars, which makes the situation even worse.

Based on Canada’s Food Price Report 2024, an individual’s monthly expenditure for a healthy diet should be $339. Again, the current average monthly spending is $248. Until July 2021, Canadians spent more on average than the desired budget to support a healthy diet. Since then, it has clearly been a challenge.

Canadians are either wasting less or finding alternative ways to source food outside conventional channels like grocery stores, such as dollar stores and non-traditional grocery discounters. Per capita, food expenditures in our country have never been as low as they are now.

One might think that grocers are struggling with this situation, but they are readjusting their strategies and putting more pressure on suppliers with higher fees and lower prices. These are perfect conditions for a potential price war later this year, so don’t be surprised if it happens.

The data on food service provides a different perspective. On average, Canadians spent $169 at restaurants in January, about the same as last year and an increase from $149 in January 2018. However, these sums are in real dollars. The current retail/service split in Canada is that about 41 percent of all money spent on food is at restaurants, compared to a split closer to 54 percent in the U.S., favouring food service. Given the market’s frugality, it’s surprising to witness such substantial spending at restaurants, where you usually get less value for your money.

The days of uncertainty regarding the balance between working from home and working away from home are long gone. The food economy has, for all intents and purposes, normalized. Food inflation is causing Canadians to spend less at grocery stores, which may seem counterintuitive, but this is what the data is telling us. Currently, about 18 percent of all retail dollars are devoted to food, compared to 21 percent in 2017.

Simply put, the cost of living is a problem for many Canadian households, and trading down is much easier with food. People may be ordering in more often to avoid tips and overpriced beverages, for example.

All of this is based on our trust in Statistics Canada, which may not be all that strong. However, Statistics Canada is merely an indicator, and Canadians have no other way to know what is really going on out there other than reading reports from the federal agency. Regardless of how we interpret the data, the numbers are not encouraging.

This is what happens when our population grows, but our collective economic wealth stagnates.

Sylvain Charlebois is senior director of the agri-food analytics lab and a professor in food distribution and policy at Dalhousie University.

This article is written by or on behalf of an outsourced columnist and does not necessarily reflect the views of Castanet.



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About the Author

Welcome to Writer’s Bloc, an opinion column for guest writers to share their experiences and viewpoints with our readers.

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