Loblaw, Walmart face heat on what they are doing to stabilize food prices

Click to play video: 'Loblaw head Galen Weston says grocery code of conduct would raise food prices'
Loblaw head Galen Weston says grocery code of conduct would raise food prices
WATCH: Loblaw head Galen Weston says grocery code of conduct would raise food prices – Dec 7, 2023

Loblaw chair Galen G. Weston says “we know we all need to do more to help” as he and the head of Walmart Canada appeared back to Ottawa to explain their plans to stabilize food prices.

The appearance comes just hours after a new 2024 Food Price report from Canadian researchers suggested grocery prices are expected to rise next year, but not at the same pace as was seen in 2023 as inflation cools.

The researchers estimate food prices will increase by 2.5 to 4.5 per cent in 2024. This translates to a family of four spending $16,297.20 on groceries, according to the report, amounting to an increase of about $701.79 compared to last year.

Weston stressed Loblaw is working to ease the prices on items including bread, milk, butter and chicken. He says these make up 10 per cent of grocery sales at Loblaw stores. Weston reiterated a point from an earlier committee appearance that Loblaw only sees $1 in profit for every $25 sold.

Story continues below advertisement

“Food prices are definitely stabilizing, and we expect that to continue, but we are concerned the grocery code of conduct could slow down this momentum,” Weston told the committee in his opening statement.

The code is reportedly nearing completion and aims to be an industry-led document, with the goal of increasing “fair and ethical dealing” across the grocery supply chain in Canada.

Weston added that Loblaw is committed to signing the code, but says it is opposed to the current version due to the company’s estimate that it could add up to $1 billion to the cost of food through means like administrative fees and penalties.

Where are cost increases coming from?

Ontario Conservative Lianne Rood said she’s a proponent of the code and asked Weston where he sees the increased cost of food coming from.

Story continues below advertisement

“This idea that grocers are the problem has shifted the conversation to the wrong place,” Weston replied.

The Loblaw chair went on to say larger food manufacturers they work with have posted strong quarterly results linked to price increase and listed Pepsi, Nestle, Procter and Gamble plus Kraft/Heinz.

Click to play video: 'Food prices in Canada set to rise in 2024 – but by how much?'
Food prices in Canada set to rise in 2024 – but by how much?

B.C. NDP MP Alistair MacGregor homed in on Loblaw’s own profits, which came in at $621 million in the company’s third quarter – up from $556 million the year before. In response, Weston said that it’s the primary goal of a business to grow and increase profits annually.

Breaking news from Canada and around the world sent to your email, as it happens.

“I do understand that Canadians are feeling this pressure, and they look at these big numbers and they think to themselves ‘gosh if that company would not make so much profit our food prices would go down’ but that’s not the way that it actually works,” Weston said.

Story continues below advertisement

When asked about his own compensation, $11.7 million in 2022, Weston acknowledged that it’s “a big number” but “reasonable in the context of other executives.” He added he is “empathetic” to people struggling with cost of living, and said Loblaw has put $438 million into lowering prices over the last 12 weeks.

Rick Barichello is professor at the University of British Columbia who specializes in food economics. He says that a lot of the costs at the check-out line originate from farther down on the supply line. However, he adds that it is very difficult to get a full picture of what the key price driver is.

“We’ve tried to look at some of these issues in our work, and it’s very, very hard to draw a conclusion. Sometimes you can find some results [in] one direction, sometimes you can find results in others,” Barichello said.

“But people who would argue that there should be more competition in the grocery sector, that’s of course, a valid argument. A very valid argument.”

Ontario Conservative Dave Epp asked Weston about the impact of the federal carbon price on grocery prices, and Weston said he did not have specific information as Loblaw stores don’t deal with it directly, but added  that anything putting cost pressure on the system should be looked at.

The Conservatives have been using the carbon price, often referred to as “carbon tax”, to attack the Liberals on the increasing cost of food, arguing it increases production, manufacturing and shipping costs.

Story continues below advertisement

Shortly after, Manitoba Liberal Ben Carr asked about the price impact of climate change. While he didn’t provide a specific figure, Weston said there are “meaningful impacts” that are encountered on a weekly basis.

On this front, Barichello says that he and his colleagues’ research finds that energy prices are not a “significant driver” of the overall cost of food.

“You’re talking about a factor that’s a small percentage of costs and you’re talking about a small percentage added by the carbon tax. So when you multiply two small percentages it’s a trivial component,” he said.

Barichello added that climate change will have more long-term food price implications, but he does not see them having a significant impact on this shorter term price inflation.

While there are many factors at play in what determines grocery prices, global market prices do play a role. Barichello says these can be influenced by many unpredictable events, such as Russia’s invasion of Ukraine driving up grain prices, but globally prices are stabilizing.

“These prices internationally vary a lot. And and also they’ve been falling on on average, except for maybe sugar and rice more recently. And that’s not from climate change. That’s from [Indian] export bans,” he said.

'We're doing 'everything we can': Walmart Canada CEO

Prior to Weston’s appearance, Walmart Canada CEO Gonzalo Gebara appeared remotely before the committee.

Story continues below advertisement

When pushed on his company’s concern with the upcoming grocery code of conduct, Gebara said he believes it is already following through in spirit by maintaining strong relationships with suppliers.

In response to that, Ontario Liberal MP Leah Taylor Roy asked Gebara what else Walmart can do to ease affordability challenges.

“I hope you trust me when I tell you that we’re doing everything that we can do to run the tightest operation possible so that we can continue to offer the lowest prices in the market,” Gebara replied.

Click to play video: 'Could a grocery code of conduct cut food prices?'
Could a grocery code of conduct cut food prices?

Gebara maintained that he sees the Canadian grocery market as competitive and told the committee the code will increase bureaucracy and the cost of doing business.

Loblaw has also said it cannot endorse the code in its current draft form, arguing it would further drive food inflation. The claim has been made several times by grocers, but there’s been no clear evidence presented by grocers on this.

Story continues below advertisement

In the lead-up to Thanksgiving, Innovation Minister François-Philippe Champagne called on Canada’s major grocers to do more to stabilize prices by the holiday or else the government would take action.

This could include reforms to the Competition Act, which are in progress, and potential tax measures.

At the end of October, MacGregor led a motion at the committee to call the grocery heads back to committee to show them what their plans are and testify again.

Specifics of the plans are expected to be withheld due to competition implications, but committee members are allowed to view them privately.

— with files from The Canadian Press.

Sponsored content