Canada's biggest grocery store freezes prices amid profiteering allegations

Loblaw firm says it will lock in 'anonymous' prices amid looming parliamentary inquiry into the food retail industry Canada's biggest grocery store has announced price freezes on its low-cost product line, amid accusations of profiting from a worsening cost of living crisis - and a looming parliamentary inquiry into the food retail industry. Inflation figures on Wednesday showed that the country's grocery prices rose 11.4% compared to last month, continuing a surge not seen in more than four decades.

Energy and housing costs have soared in recent months, but Canada's political leaders have focused their sharpest attacks on the country's three wholesalers, calling for an increase in their profits amid high inflation.

Earlier this week, Loblaw Company – which owns more than 20 grocery and supermarket chains – said it would lock in the prices of its 'nameless' home brands, which cover more than 1,500 daily necessities, until January 31, 2023.

Company president Galen Weston framed the move as a way to temporarily protect customers from the effects of inflation, writing that costs were "grossly" out of his control.

"A lot of Canadians are struggling right now and it's important for a grocer to show empathy to the public," said Sylvain Charlebois, a professor of distribution and food policy at Dalhousie University. "But it happened about a month late and on the day parliament decided to vote on the inflation inquiry."

Others dismissed the move as a publicity stunt.

“This announcement has confirmed that supermarkets do have some leeway in setting prices. They're not just innocent middlemen forced to charge consumers higher input costs and they're actually making strategic decisions about prices and what the market is going to bear," said Jim Stanford, an economist and director of the Center for Future Work.

Rival grocery chain Metro dismissed Loblaw's move as an "industry standard". Metro didn't immediately announce that they would follow suit, but only suggestions that it could trigger potential price-fixing accusations in a country where the biggest wholesaler has previously admitted to colluding on bread pricing for more than a decade.

"This really confirms what we already know about wholesale business - it's a convenient oligopoly," Stanford said. “Explicitly or implicitly, the three big chains that dominate industry in Canada work together around the clock – not only in setting consumer prices, but also in setting prices for suppliers and access for suppliers, and of course, setting wages for workers.”

The Loblaw company did not respond to a request for comment from the Guardian about the timing of the announcement, but told Canadian media in a statement that their decision to freeze prices was "unprecedented".

In 2018, the country's competition bureau found wholesalers and bakeries colluding to set prices, resulting in fines of millions. The country's three main wholesale chains (two of which are controlled by billionaire families) sparked more outrage in 2020 when they pledged to offer frontline workers a "hero's pay" hike during the coronavirus pandemic - only to end the program just months later.

New Democratic party leader Jagmeet Singh has emerged as the industry's sharpest critic, accusing him of being driven by "greed". “Just a reminder – the top three grocery stores have reported a total net profit of $2.3 billion in 2022 so far. That's $228 million more than the previous year – the $228 million they took from YOU as a consumer," Singh tweeted. “CEOs use inflation to cover their greed.”

Singh also wrote that it was "no coincidence" that the Loblaws made the announcement shortly before parliament voted unanimously to hold a hearing on corporate profits - including the grocery industry.

"Pressure is at work," he tweeted.

One economist argues that grocery stores are benefiting from the pandemic and inflation – but not in the way the public often suspects.

“Complex issues are often oversimplified by politicians,” says Trevor Tombe, a professor at the University of Calgary. “And complex issues require a much more nuanced policy response.” Tombe pointed to the industry's profit margins, which have slipped in the last quarter.

The explanation behind the recent surge in profits that angered lawmakers, he said, was the fact that people were buying more groceries. Higher costs have changed spending patterns, meaning people are cutting back on certain luxuries – like eating out at restaurants. Instead, they buy more groceries.

Tombe says the industry's poor optics - a history of admitted collusion and the fact that billionaire families control the country's largest wholesale chain - are not helping. "Inflation is one of these big and complex global problems, and it's not something that will be solved by blaming grocery retailers."

“Supermarkets are very profitable. It's not a skin-of-the-teeth surgery," he said, adding that profits had doubled since the start of the panic.

“They have taken advantage of the unique circumstances of the pandemic, to fatten their margins. Part of that is the despair people feel when you can't get toilet paper or other basic items in limited supply."

But he and Tombe agree that the grocery industry is receiving disproportionate attention and scrutiny, amid soaring profits from energy companies.

“There is symbolic visibility to grocery shopping because we go there often. And we have to point the finger somewhere else that is even worse,” Stanford said. "But that doesn't mean we shouldn't look at grocery supermarkets."

Post a Comment

Previous Post Next Post