There have been calls for Canadian grocers to voluntarily freeze prices for some main staples as we weather the current food inflation storm.
The first grocer in the world to do this was more than six months ago. Since then, many Western economies have seen grocers freeze prices, including German giant Lidl and the well-known French multinational Carrefour. Canada has had no grocer pursuing this strategy; none, that is, until now. As of this week, Loblaw Companies Ltd. became the first Canadian grocer to voluntarily freeze prices for a variety of food products.
In an unprecedented move, the number one grocer has frozen prices for over 1,500 privately labelled products sold across the country until the end of January 2023. It was long overdue for Canadian shoppers, especially the 25 per cent having a hard time coping with food inflation.
Consumers and politicians have been continuously criticizing Canadian grocers – all of them – for price gouging. The criticism even pushed Ottawa’s standing parliamentary committee in agriculture to launch an investigation on the matter just a few weeks ago. The industry desperately needed to do something for its own reputation.
Some of the criticism was expected and likely deserved. Given what happened with the bread price-fixing scheme, few consumers have forgiven the industry, even after all this time. In December 2017, Loblaw and Weston Bakeries admitted to having been part of a bread-price fixing scheme for 14 years. Indeed, Canadians were able to apply for a 25-dollar gift certificate, but not one single person in the industry was fined or went to jail. Things would have played out differently in the United States. Americans don’t mess around with companies trying to undermine the free market.
In our grocers’ defence, though, financial numbers aren’t necessarily telling us that grocers are abusing their oligopolistic powers, even in the current inflationary environment. Many will want to believe it, but the evidence is just not there. Canadian grocers have done well, but gross margins have remained anywhere between two and four per cent. While Loblaw’s numbers are slightly higher than usual this year, it’s nothing like in other economic sectors.
Take banking, for instance. Last year, the Royal Bank of Canada alone made more money in one single quarter than all Canadian grocers – including Loblaw, Sobeys, and Metro combined – made during the entire fiscal year.
Banks are making a killing while shelter costs are also impacting food affordability. Many Canadians are paying more to have a roof over their heads, mainly due to higher interest rates. Paying more for shelter will compromise food budgets eventually.
According to Statistics Canada, 56 per cent of Canadians are currently concerned about whether they can afford housing or rental costs. Also, in a recent survey, more than seven per cent of Canadians are now using a credit card to pay for groceries without knowing when they will pay their balance back. Interest rates charged by banks add to these outstanding amounts.
While some will appreciate Loblaw’s empathetic gesture, the grocer’s latest campaign will likely bring some cynicism along the way.
Some will state that freezing prices for a while is an admission of guilt by Loblaw. Not necessarily. Food inflation is a worldwide phenomenon. Higher costs have severely impacted the entire global agri-food sector. Even if Canada has the third-lowest food inflation rate amongst G7 countries, Canadians could not have been spared.
Some will also claim that other products will increase even more, penalizing those who don’t want to buy products that are part of the campaign. That is certainly possible, but freezing prices for more than 1,500 products for more than three months in food retail is quite the statement. Anyone involved in the industry will appreciate that.
The September Consumer Price Index (CPI) is being released today. Even if Canadian grocers should have done this a while ago, Loblaw did choose the right week to somewhat tame the eventual barrage of profiteering accusations that always come with the CPI report. The report will likely remind Canadians, once again, that feeding ourselves has gotten more expensive.
In the grand scheme of things, Loblaw’s move was easy to execute. Negotiating with contract manufacturers who support the grocer’s brands is not that challenging. It just needed a plan. The campaign is powerfully symbolic and will show that grocers in our country do have a heart. Let’s hope other companies follow suit.
By Sylvain Charlebois
Dr. Sylvain Charlebois is senior director of the agri-food analytics lab and a professor in food distribution and policy at Dalhousie University.