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September 02, 2022

Higher food prices are everywhere, and with those, accusations of “greedflation” are widespread. But a recent report by the Agri-Food Analytics Lab at Dalhousie University finds no data to support that grocers are responsible.

 

Variations in the gross margins of Canada’s top grocers have been minimal since 2017. Indeed, revenues have increased dramatically, but so have the costs of goods sold says Sylvain Charlebois, senior director of the lab.


Loblaw Companies, Metro and Empire/Sobeys have all posted modest changes in the last five complete fiscal years. Since the start of the pandemic, while revenues did go up, gross margins have
remained relatively consistent throughout.

 

 

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Canada is home to just two national grocers, Loblaw Companies and Empire/Sobeys. Metro is only in eastern Canada. Walmart and Costco are grocers, but the majority of revenues are not food-related.


Canadians believe that the U.S. food distribution landscape is far different and is more competitive. Some consumers suspect collusion and perhaps more power given to grocers in Canada due to oligopolistic powers.

 

“As we did with the Canadian numbers, we looked into financial statements of some of the top grocers in the United States,” says Charlebois. “The gross margins appear to be quite similar to those in Canada.”


Accusing the industry of colluding or profiteering is easy. The conversation on “greedflation”becomes more interesting when the question is asked: how much is too much. Canada’s food inflation appears to have peaked in June, or perhaps earlier. From an industry perspective, less volatility will allow for better planning, more promotions, more loss-leading, and of course, lower prices in some categories.

 

“Food prices are still expected to continue to rise until the end of this year, but at a much slower pace,” predicts Charlebois. “We expect the general inflation rate to soon outpace food inflation for the first time in many months.”

 

Source:   Agri-Food Analytics Lab September 1, 2022 report release
 

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Submitted by Karen Davidson on 2 September 2022