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Canadians didn’t get the full picture when grocery CEOs raking in record profits testified before a parliamentary committee tasked with investigating the drivers of high food prices, an economist and tax specialist said.
The country’s biggest grocery CEOs were asked to testify amid calls from politicians and civil society groups for greater transparency, which many hoped would arise in Wednesday’s committee meeting when MPs questioned the grocery magnates.
“They’re well-trained in their talking points, which are to claim they're here to serve Canadians,” said DT Cochrane, an economist with Canadians for Tax Fairness. The three leaders of Loblaw Cos. Ltd., Metro Inc. and Empire Co. Ltd. came prepared with numbers that show them in the best possible light, unsurprisingly, leaving Canadians without the full picture, he said.
The Standing Committee on Agriculture and Agri-Food’s study into food price inflation has captured the attention of Canadians grappling with the cost of groceries, which reached a 41-year high in October 2022. Empire CEO Michael Medline cited profit margins of 2.5 per cent, while Loblaw CEO Galen Weston Jr. said his company’s grocery arm operates on a four per cent profit margin.
For Loblaw, this translates to roughly $1 of profit on a $25 basket of groceries, so the “idea that grocers are causing food inflation is not only false, it's impossible,” Weston told the committee.
The profit margins cited by the CEOs include operating expenses like taxes, payroll and the cost of advertising, said Cochrane.
“It also includes costs like the obscene bonuses that the CEOs receive,” he added. Instead, he looks at the gross markup: how much the companies add over and above the cost of the goods they sell.
In 2019, Loblaw’s markup was 44.3 per cent, and in 2022, it rose to 46.7 per cent, based on the company’s financial statements. While that’s only a 2.4 per cent increase, Loblaw’s revenues are huge, so it makes a big difference, said Cochrane. For example, in 2022, Canadians would have saved close to $900 million if Loblaw had kept its 2019 markup.
“I’m going to be asking you tough questions,” NDP Leader Jagmeet Singh told the CEO of Loblaw, Canada’s largest food retailer, when Weston approached him for a handshake a few minutes before their much-anticipated confrontation.
Singh sat a few metres away from Weston and Medline, with a foot-high stack of papers to his right.
The federal NDP advertised the showdown between Weston and Singh on its website and social media, giving Canadians the option to RSVP to watch the committee meeting. Enough people RSVP’d to crash the website the day before the meeting, according to a tweet from the NDP’s official account.
Brandishing the towering stack of more than 2,000 questions Canadians had submitted for the grocery CEOs, Singh went on the offensive, repeatedly asking Weston how much profit is too much and contrasting the company’s record profits with the reality that Canadians are hurting from high food prices.
“I understand how difficult it is for so many Canadians,” was one of Weston’s responses, adding the company is “actively lowering prices on key essentials” and selling many of them at a loss.
This statement from Weston — born into one of Canada’s most powerful wealthy families, which owns the massive holding company George Weston Ltd — “rings completely hollow,” said Cochrane.
“The idea that he can empathize with the average Canadian family living paycheque to paycheque, just, it's galling,” said Cochrane, who read a transcript of the meeting.
According to the Globe and Mail, Weston’s 2021 pay package included a $730,546 salary, a $2.17-million bonus and share and stock option awards valued at $2.47 million.
In 2020, the financial performance of George Weston Ltd. — the holding company for Loblaw and Choice Properties Real Estate Investment Trust — would have resulted in some bonus payments being zilch, but the company opted to pay out those bonuses anyways, according to a 2021 report by the Canadian Centre for Policy Alternatives.
As for Loblaw selling some products at a loss? Cochrane says this isn’t an act of kindness to Canadians, but rather a pricing strategy designed to “get more money out of us” by attracting people into the stores where we end up buying higher-margin items.
Though Singh came out swinging — and was even asked to rein it in by committee chair Kody Blois after an initial exchange with Weston — other MPs asked tough questions of the three CEOs in attendance.
Throughout the committee meeting, the CEOs maintained they are not profiting from inflation and pointed to increased costs along the supply chain as proof they, too, are victims of inflation.
The day after the testimony, the Canadian Labour Congress issued a statement urging the federal government to crack down on corporate greed and stop wealthy CEOs from price-gouging Canadians on everyday essentials.
Natasha Bulowski / Local Journalism Initiative / Canada’s National Observer
This article was updated to include a photo
Comments
Bottom line, if prices go up and your profits stay steady, you're just passing along price increases. If prices go up and your profits go up, that's because you were jacking up the prices. Big grocery chains' profits have been soaring. Therefore they were jacking up the prices.
There's no disputing this, it's a frigging syllogism!
It’s important that we have grocery companies that are financially stable and profitable as it also offers us a better system of food security with their buying power across the globe . There is a very small margin of profitability on food items . As stated by the Weston CEO a lot of their profit came from non food items such as pharmaceuticals and non food items through their holdings of Shoppers drugs . These companies as stated again by the Weston CEO put these profits back I to the community by building new stores and other ventures creating employment building more economy . We don’t live in a welfare state. Mr Singh should not be beating up on good business practices but rather do his job within the govnment looking into govnment waste of tax payer dollars instead of passing the buck on businesses to make life more affordable for Canadians . More efficient government , less tax for the average Cdn .
Utter nonsense. I take it you're a PR flack for the grocery industry.
So, first of all, it's not that important that grocery companies be particularly profitable, and it's CERTAINLY not important for their profits to INCREASE--to the contrary, it's good if their profits stay low. Indeed, in a capitalist economy, its sole claim to efficiency is based on the idea that competition will keep profits low, stopping firms from gouging consumers. That's "efficient market hypothesis" 101, or going further back, it is Adam Smith's "invisible hand".
Second, there used to be much less concentration in the Canadian grocery industry, and nothing terrible happened to food availability because of that. Concentration in the food industry does NOT lead to food security--quite the reverse, it leads to fragility. Single points of failure are bad. But it is now an oligopoly, and profits are increasing rapidly, because collusion between the oligopolists allows that. This is a bad thing, not a good thing.
Third, "as stated by the CEO" is a claim that gives not the slightest trace of confidence in the veracity of the statements involved. He lies like a rug. Further, it's necessary to look very carefully at claims about profit margins. Big grocery chains are also vertically integrated; they own many of the outfits producing the food. So a chain of grocery stores could have low margins on sales of President's Choice or No Name brand food items . . . because the profits are being made over at President's Choice, which the grocery chain also owns. And big corporate chains tend to create less employment and be worse for local economies than smaller businesses, so that claim is the reverse of the truth as well. Wal-Mart is the notorious king of local economy killing, but it's a much wider phenomenon.
Fourth, we do live in a welfare state, and a good thing too. Look up the meaning of the term. A somewhat inadequate one, to be sure.
Fifth, Mr. Singh is beating up on business practices that are bad for the citizens of his country. He absolutely should be doing that.
Sixth, you finish off with a not-very-good deflection which is completely off topic. You're like a bank robber saying to the cop "Who you should really be arresting is that arsonist over there, not me!" Um, no, the cops should arrest both. Stopping price-gouging does not preclude pursuing government efficiencies, it's a stupid knee-jerk smokescreen attempt.
Break the big chains up into little pieces that will be unable to collude on price.
Exactly what you said!!! That goes as well for the telecomm industry, energy pricing to householders, and the cost of water and garbage removal. Not to mention the construction industry.