The Supply Chain, Profits, and Food Prices: Recent Developments and an Excellent New Video

It’s been a busy couple of weeks in the food inflation debate. Recent developments include:

1. The federal government imposed a $50 million fine (the highest in history) on Canada Bread for its role in a bread price fixing scandal dating back to 2007. 

2. The House of Commons Agriculture & Agri-Food committee released a report of its investigations into grocery profits and higher food prices. (See the Centre for Future Work’s submission to that inquiry, documenting the sustained rise in food retail profit margins since the pandemic.)

3. The latest inflation data from Statistics Canada has confirmed that food inflation is continuing at historically high rates, despite the slowdown in other forms of inflation in Canada. As of May, grocery prices were 9% higher than a year earlier – slowing only marginally from the 9.1% rate recorded in April. In contrast, overall consumer price inflation slowed to 3.4% over the year ending in May – barely one-third as fast as grocery prices.

4. Grocery giant Empire (one of the three large chains that together control about two-thirds of Canada’s supermarket industry) issued new financial statements confirming a further rise in profits, and announcing a 10% increase in its quarterly dividend (indicating management’s confidence that those profits are likely to continue). Centre for Future Work Director Jim Stanford was interviewed by the Toronto Star on those results and their significance.

5. Meanwhile, the Competition Bureau issued another report, this one on its “market survey” of the grocery store industry. This report confirmed that the grocery industry has become notably more concentrated over the past generation (through mergers and takeovers), and that the resulting lack of competition has contributed to inflated food prices. It also confirmed that profit margins have increased measurably in the sector since the pandemic, resulting in higher profits for all of the major chains. The Bureau made 4 recommendations to government to foster more competition, but those recommendations were constrained by the limited power of the Bureau to oppose corporate concentration under existing Canadian competition law.

The House of Commons committee’s report did not take a firm stand on the issue of supermarket profits. It cited some submissions (including ours) indicating those profits were elevated, but also reported opposing views from the supermarkets themselves suggesting the main reason for higher food prices was the higher input costs paid by the supermarkets themselves. The parliamentary report effectively passed the issue of profits over to the Competition Bureau’s market study. However, the committee did indicate that if the Competition Bureau found evidence of excess profit-taking by the supermarkets, then the federal government should work to develop an excess profit tax on the major chains. Now that the Competition Bureau has indicated that profits and profit margins have indeed increased at the major chains, this would seem to open room for the Parliamentary committee to push that specific remedy with more vigour.

Clearly public anger over inflated food prices is becoming more intense, with each additional trip consumers make to the supermarket. This would seem to create political space for the federal government to be more ambitious in tackling this critical component of the cost of living crisis in Canada.

All of these developments create a timely context for a new video prepared by the team at The Breach (a progressive media network based in Montreal). They have produced a very effective 2-minute video, based on a television interview with Centre for Future Work Director Jim Stanford, that highlights the cascading impact of increased profit margins at every step of the food supply chain. Many thanks to The Breach for this fine work! Please watch the full video here: