A flyer at Victory Meat & Produce Market, a small New Brunswick grocer, recently offered fresh local turkey for $3.99 a pound, two $4 bags of carrots or onions, and a bunch of celery for $2.29 — prices comparable to its domestic competitors.
For 81 years, the independent store has offered quality products at affordable prices, earning a loyal customer base despite the growing dominance of national grocery chains.
“We have longstanding relationships with our suppliers and local growers, as well as our employees who have been here for 20 years,” says Alex Scholten, co-owner of the Fredericton store. “Our clients are like family and I think those relationships have kept us going for so long.”
In Canada’s highly consolidated grocery industry, there are fewer mom-and-pop businesses.
Loblaw, Sobeys and Metro account for more than half of all food retail sales in Canada, according to industry trade magazine Canadian Grocer’s Who’s Who 2022 report.
Adding Walmart and Costco, just five companies control three-quarters of grocery sales nationwide, the report found.
That market concentration has come under scrutiny in recent months as food prices have risen at the fastest pace in 40 years.
All five companies face allegations of profiteering, and the executives were called to testify at a parliamentary hearing in Ottawa where they were grilled by MPs about higher food bills.
Grocery store executives have denied the allegations and told lawmakers their margins on food are low.
“The truth is we’re at the end of a very long food supply chain that has economic inputs at every step and every stage,” Empire President and CEO Michael Medline told the committee in March.
The federal competition watchdog has launched a separate study into competition in Canada’s grocery stores, questioning whether “competitive factors” — besides extreme weather, higher input costs, Russia’s invasion of Ukraine and supply chain disruptions — affect food prices. The Competition Bureau plans to publish its findings in June.
Innovation Minister François-Philippe Champagne said at the launch of the review last November that the study comes as Ottawa conducts a long-promised review of Canada’s competition laws to “make life more affordable for Canadians.” “.
When it comes to groceries, however, how much consolidation and competition issues affect the price of milk, bread or vegetables is complicated.
Michael von Marceau, a professor of food economics at the University of Guelph in Ontario, said that while Canada’s grocery industry is highly concentrated, it’s also highly competitive.
“I think consolidation provides economies of scale,” he said. “I know the notion that size has value is unpopular … but that could help prices go up. We have a very competitive market for food consumption.”
The current distrust of grocers may partly stem from Canada’s bread price-fixing scandal, von Massow said.
In 2017, George Weston Ltd. and Loblaw Companies Ltd. revealed they were both involved in an industry-wide bread price-fixing arrangement that spanned more than a decade.
At least $1.50 was artificially inserted into a 16-year bread price-fixing conspiracy involving the country’s largest bakery wholesaler and grocery retailer, Canada’s competition watchdog said in 2018 court filings. price of bread.
The Competition Bureau said its investigation into bread price fixing was ongoing.
Von Marceau said the scandal has given Canadians good reason to be skeptical about the causes of high food prices — especially as grocers are making big profits.
“We’re feeling the pinch at the grocery store,” von Marceau said. “We’re looking for someone to blame, and that’s the one who’s charging us more.”
But he said food inflation was due to a range of inflationary pressures affecting the entire supply chain.
In fact, Fredericton’s Victory Meat & Produce Market has seen its costs rise about as much as a large grocery store.
Transportation, utility, food and labor costs have all soared over the past few years, Scholten said.
The store worked hard to keep costs low, but Scholten said prices were still going up.
While increased competition in the grocery industry is a good thing, he said it probably won’t affect prices much.
“That’s the environment we’re in right now,” Scholten said. “Everyone is facing significant cost increases.”
Canada’s big grocery chains are still taking advantage of their scale and may even engage in noncompetitive practices, von Massow said.
“Where I think they’re using market power is to support suppliers’ supply chains,” he said. “It would make it harder for smaller independent grocers to compete because they wouldn’t be able to buy either.”
In fact, one of the keys to Victory’s success is its wholesale business.
“We offer both retail and wholesale products, so we’re able to build enough volume that we have enough buying power to compete with our larger competitors,” Scholten said.
Focusing on food retail has both advantages and disadvantages, said Michael Graydon, chief executive of the Canadian food, health and consumer goods suppliers industry group.
“The grocery market is consolidated, there’s no doubt about it,” he said. “There’s some upside. They’re very sophisticated retailers with a strong supply chain, so getting products from the manufacturer to the distributor to the store tends to be pretty efficient.”
For some suppliers, it’s easier to sell to five companies than 25, he said.
But there are downsides, Graydon said.
“There’s an imbalance of power, and that’s the root cause of our efforts to create a code of conduct,” he said.
The industry-led Canadian Grocery Code is expected to be released in the coming weeks.
The document is expected to increase “fair and ethical dealing” in Canada’s grocery supply chain, according to draft guidelines seen by The Canadian Press.
“It sets some rules for participation,” Graydon said. “It removes a lot of unilateral decision-making and imposing conditions on manufacturers without negotiation.”
But the downside of leveling the playing field between grocers and suppliers could be higher prices, von Massow said.
If you limit how much the grocer can put pressure on the supplier, he said that could take money out of the grocer’s pocket.
“Either they eat it — which doesn’t affect the price — or they pass at least some of it on to consumers,” von Marceau said.
—Brett Bondell, Canadian Press