OTTAWA – The Trudeau government is urging grocery giants to find a way to stabilize prices by Thanksgiving, but it’s far from certain Canadians will gain anything, two experts warn.
“It is an announcement that aims to show that we are doing something to get the cost of living under control, but does not contain enough detail to guarantee a concrete impact on prices,” said Michael Von Massow, a food industry specialist the University of Guelph Ontario.
In his opinion, the government is forced to react because it is performing very poorly in the polls and the opposition is accusing it of inaction, even if prices are already stabilizing. So, in the face of adversity, the Trudeau team must be proactive in what it is doing by attacking an easy and very unpopular target: grocery chains.
Grocers: an easy target
Eighty-five percent of Canadians believe these companies are making undue profits at their expense, says Sylvain Charlebois, scientific director of the Agri-Food Analytical Sciences Laboratory at Dalhousie University in Halifax. In fact, the two researchers emphasize that there is no data that clearly proves this.
In August, the Bank of Canada instead said the increase in its profit margin in 2021 was less than a tenth (0.1%) of food inflation. Therefore, Mr. von Massow believes that the announcement is more political in nature than based on clear data.
In any case, the Big Five of food distribution will be called to Ottawa on Monday morning, where they will meet Industry Minister François-Philippe Champagne, who is waiting for them.
“Let’s be clear: Canadians deserve food solutions […] We must, and we will, act together to stabilize food prices for Canadian consumers and improve competition in Canada,” he said Friday.
Strengthen competition… and trust
To increase competition, the government also announced Thursday that it would give the Competition Bureau more powers to increase competition in Canada. The aim, for example, is to take action against large food retailers who prevent smaller food retailers from setting up shop.
“This proposal is excellent. “This should have been done a long time ago,” said Mr. Charlebois, for whom the agri-food industry suffers from a lack of public trust precisely because the Competition Bureau is toothless. However, without trust, it is impossible to justify price increases, he says.
Joël Lemay / QMI Agency
Freezing the prices of basic foodstuffs, a solution?
Canada isn’t the only country looking for solutions to combat rising food prices. At the end of August, France announced a price freeze for 5,000 basic products. Should we be inspired by this?
Two food industry experts are skeptical and warn of the perverse effects of the French solution.
“We need to think about the entire supply chain” and not just those at the end, the grocers, warns Sylvain Charlebois, scientific director of the Agri-Food Analytical Sciences Laboratory at Dalhousie University in Halifax.
He explains that food giants risk turning against farmers and other players in the chain such as packaging, transport and food processing companies.
However, their scope for action is very limited, as their operating costs have also risen sharply due to increased fuel prices, extreme climate events with crop damage, the war in Ukraine, labor shortages and rising wages.
Food sovereignty
Michael Von Massow, a food industry specialist at the University of Guelph in Ontario, adds that a price freeze could encourage retailers to replace more expensive Canadian products with cheaper and lower-quality foreign products, which would harm our food sovereignty.
And that is without taking into account the negative signal that this method would send to investors, continues Mr. Charlebois, who fears that some will leave the Canadian market because they consider it less competitive.
“We are not France, which benefits from the diversity of the European market. “The risks for us are extremely different because we are isolated from the huge American market,” he says.
Finally, “the question must be asked: Who will pay for the price freeze?” said Mr. von Massow. Either grocers will make their suppliers pay, or they will pass the bill on to consumers who buy uncontrolled products, or the government will have to subsidize frozen products so taxpayers will have to pay the price with their taxes.
EMPIRE PROFITS (SOBEYS, IGA) IN 2021
- $701.5 million
- Above 20.2%
LOBLAWS PROFITS IN 2021
- $1.98 billion
- Above 65%
METRO PROFITS IN 2021
- $825.7 million
- Above 3.5%