OPINION: Despite anger, accusing grocers of ‘greed’ is pointless

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As food prices rise, many are quick to blame grocers for taking advantage and taking advantage of consumers. The notion of “greed” has emerged as one of the most discussed issues over the past month. Food inflation in Canada is at its highest level in 41 years, at 10.3%, and consumers are unlikely to get any relief anytime soon.

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It is difficult to determine whether grocers have inflated prices to benefit their bottom line. If greed exists in our food sector, how do we measure it? Well, our lab tried.

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In a recent report, we used publicly available data to look at gross profit (revenue less cost of revenue) for each of the Big Three Canadian grocers: Empire/Sobeys, Metro and Loblaw. We then calculated their respective “best” and “average” performance over the past five years. Next, we compared each company’s last two quarters of 2022 to their best performers and averages for the year and quantified the surplus (deficit).

Empire/Sobeys’ 2022 performance outperformed its best second quarter year by $7 million, while their third quarter numbers underperformed it by $44 million. For the last two quarters of 2022, Empire/Sobeys recorded a net deficit of $37 million compared to its best performance of the year. Metro’s performance in 2022, on the other hand, compared to its best years, outperformed by $3 million in the first quarter and underperformed by $14 million in the second quarter. For the last two quarters of 2022, Metro Inc. posted a net deficit of $11 million compared to its best performance of the year. Nothing too outrageous.

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Loblaw, however, is an exception. In the first quarter of 2022, Loblaw outperformed its best years, equating to $68 million; in the second quarter of 2022, it surpassed its best-year performance by $112 million. So Loblaw’s gross profit so far in 2022 tops its best performance in five years by $180 million, or about $1 million a day to date.

Does that mean Loblaw is greedy? Not enough. Loblaw’s reported revenues combine food, health, beauty, apparel and other general merchandise into one category. Grocers are incredibly diverse, selling cosmetics, medicines, and clothing.

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We find it interesting that Loblaw can justify food and non-food (healthcare, beauty, apparel and other general merchandise) as a combined operating segment. It is not clear how food retail and drug retail are similar in nature, sales or production. Canadians deserve to know the details, especially when food inflation is in double digits. It is worth studying.

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Yet the blame game continues and Canadians want a scapegoat, pointing to another needed change, which involves the Competition Bureau. The Bureau has consistently failed the Canadian public by failing to provide strong support to Canadian lawmakers by simply approving acquisitions and overseeing investigations with little or no vigor. The bread price scandal is a good example. The anger directed at grocers is truly unique to Canada. Our country may be experiencing a crisis of consumer confidence that is impacting our relationships with grocers due to the Competition Bureau’s baggage of clumsy unfinished business it has with numerous files . Canadian consumers feel grossly deprived.

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In the United States, things are different. Their inherent hatred for monopolies and oligopolies pushed legislators and bureaucrats to act quickly and forcefully. Kroger is currently trying to acquire Albertsons for nearly $25 billion. The deal faces significant regulatory hurdles. Kroger could be asked to drop nearly 400 stores, creating a rival for the new grocer. The lawmaker-led initiative has been relentless and, yes, politicized.

  1. A customer leaves a Loblaw grocery store in Ottawa.

    CHARLEBOIS AND TAYLOR: Accusing grocers of “greed” is pointless, but…

  2. A new poll by Canadian fintech firm Givex and Angus Reid finds that 68% of Canadians agree that inflation has had an impact on their gift-giving plans this holiday season.

    Inflation affects 68% of Canadians’ holiday spending: survey

  3. Bank of Canada Governor Tiff Macklem takes part in a press conference in Ottawa, April 13, 2022.

    Job losses will rise but not reach levels seen in past recessions: BoC

This would never happen in Canada. When Loblaw acquired Provigo in 1998, when Metro acquired A&P in 2005, or when Sobeys bought Safeway out West, hardly anyone raised an eyebrow during the process.

More financial data to clarify food sales and a more authoritative watchdog within the Bureau, industry and grocers may be the only way to regain consumer confidence.

— Dr. Sylvain Charlebois is a professor of food distribution and policy at Dalhousie University. Samantha Taylor is a professor of accounting at Dalhousie University.

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