The Rising Price of Food: How Grocery Store Investigations Could Impact Manufacturers, Suppliers, and Small Grocery Retailers

If you shop at a major grocery store in Canada, you have probably noticed that your grocery bill has gone up in the past year. And, by now, you may have heard that the Competition Bureau (“Bureau”) intends to investigate the rising price of food, increasing at the fastest rate in 40 years, at major grocery stores in Canada. While supply chain crises, exacerbated by a global pandemic, inflation, and war, have certainly contributed to the rising price of food, the Competition Bureau questions whether lack of competition between grocery retailers may also be to blame. The majority of Canadians shop at one of three grocery companies: Loblaws (i.e., Shoppers Drug Mart, No Frills), Sobeys (i.e., FreshCo, Safeway, Lawtons), or Metro (i.e., Food Basics). The theory goes that consumers are left with limited choice, which contributes to a concentration of industry, leaving control of an essential facet of life in Canada left in the hands of a few. The term being thrown around in Canadian media is “greedflation” – the idea that industry composition allows consumers to take advantage of perceived market dominance under the guise of inflation to raise prices to pad their bottom line.

What you may not know, though, is that the Standing Committee on Agriculture and Agri-Food (“Committee”), as part of their study on global food insecurity, passed a motion on October 5th to essentially do the same as the Competition Bureau – investigate the rising price of food in relation to large grocery chains. Unlike the Competition Bureau, though, the Committee seeks to investigate profits in relation to employee wages and the cost of groceries, as well as how the grocery chains leverage their size to cut into the earnings of Canadian farmers. The Committee would also like to investigate ways in which the food supply chain can help reduce the cost of food.

Depending on where one exists on the political spectrum and food value chain, these investigations may be informative and will set the path for market, or government-led, solutions in the future. If all goes as planned, a final report should be published by the Bureau in June of 2023 (we leave it to the reader to decide whether that deadline is timely). Many stakeholders and members of the public do not appear to be optimistic.

Should the Competition Bureau’s findings reveal that more competition is needed in the Canadian grocery sector, the next steps will include a discussion on how to increase competition and reduce the market dominance of the national grocers. Given that in the past ten years, the Competition Bureau green-lit Loblaws’ acquisition of Shoppers Drug Mart and Sobeys’ acquisition of Safeway, the Bureau may choose to revisit some of its conclusions from those transactions.

In compiling its report, the Bureau will compare submissions from stakeholders with reports produced in countries around the world. New Zealand, for example, published a report in 2020 that listed solutions such as making land available to develop new grocery stores, implementing regulations for the wholesale supply of groceries thereby increasing access to supplies, establishing a grocery regulator, monitoring the conduct of grocery retailers, strengthening contractual protections for suppliers and retailers, allowing collective bargaining for suppliers, establishing a dispute mechanism for issues that may arise between suppliers and retailers, and providing consumers with the tools to assess packaging, labelling and grocery promotions. Moreover, industry competitiveness needs regular review.

There has been significant media coverage of the frictions between Canadian suppliers and grocers over the past few years, so these two reports may be welcomed not just by the Canadian consumer but also upstream stakeholders: the findings of these investigations may impact relationships that supply the country – in a good way. If increased competitiveness is found to be a solution, more retailers mean more ways to market and sell your products. Should some form of regulation be implemented, such as in New Zealand, suppliers could see greater protections. If you operate a grocery business currently, these studies may be instrumental in your expansion and growth. Generally speaking, all stakeholders in the food value chain should follow these investigations with a keen interest, as they may impact the way Canadians shop for food in the future.

All stakeholders and interested parties, including consumers, are also encouraged to provide written submissions to the Competition Bureau’s study, which can be done by emailing the following address:

Greg Lang

Major Case Director and Strategic Policy Advisor

Competition Promotion Branch

Email: mailto:cbmarketstudies-etudesdemarchebc@ised-isde.gc.ca

The deadline for submissions is December 16, 2022.

Should you wish to reach out to us, please email info@gsjameson.com