The federal government is summoning the heads of Canada’s major grocery chains to Ottawa this fall to begin discussions on a plan to lower food costs for Canadians, as inflation continues to impact grocery bills.
The companies are being tasked with coming up with a plan to stabilize prices by Thanksgiving, Prime Minister Justin Trudeau said as he marked the end of the Liberal cabinet retreat in London, Ont., on Thursday, ahead of Parliament’s return next week.
Trudeau said if the grocers fail to come up with a plan that provides “real relief” for middle- and lower-class Canadians, the government will take further action that forces the companies to do so.
That could include tax measures, he warned.
“It does not make sense in a country like Canada that our largest grocery chains should be making record profits while Canadians are struggling to put food on the table and we’re seeing record usage of food banks,” Trudeau said.
The prime minister said the heads of the country’s five top grocers — Loblaw, Empire Co., Metro, Walmart and Costco — will have the best overall view of their industry and what can be done to lower costs. Those five companies make up roughly 80 per cent of Canada’s grocery market.
For months on end, food price inflation has outpaced overall inflation, which was 3.3 per cent in July. Food inflation, by contrast, was 8.5 per cent that same month, a slight easing of price growth compared to earlier this year.
At the same time, Loblaw, Empire and Metro have reported continued profit growth in their most recent quarters. Trudeau’s announcement came hours after Empire announced its profits are up nearly 40 per cent from a year ago, a $73.5-million increase. Walmart and Costco, both American companies with Canadian arms, have also seen profits rise.
“What we are saying to them is, enough is enough,” Industry Minister Francois-Philippe Champagne said. He said he expects the CEOs to be in Ottawa for discussions next week.
The minister added the government will also be scrutinizing large food processors and looking to how G7 allies and other international partners have tackled rising food costs to inform its discussions with the Canadian grocers.
Major grocers have faced accusations of profiteering as food prices have climbed, though executives from Loblaw, Metro and Empire denied these allegations before a parliamentary committee studying food inflation earlier this year.
The Canadian companies — which also own pharmacy chains and other businesses in addition to grocery stores — have pointed to other factors within their business to account for increased profits, including strong sales of non-food items. Empire attributed its latest profit growth Thursday to the sale of its 56 gas stations in Western Canada to Shell Canada.
The Retail Council of Canada further argues rising vendor costs, driven by supply chain issues and other external factors like climate change and the war in Ukraine, are what’s driving increased prices at the grocery store.
Those vendors must also be included in this month’s discussions, it said.
“Grocers are always prepared to have good faith discussions with government about our industry, challenges with the food supply chain, or with affordability for Canadians,” spokesperson Michelle Wasylyshen said in a statement.
“But we are not going to get anywhere with discussions that time and time again fail to look below the surface as to the true cause of rising grocery prices.”
An industry committee has been working on a grocery code of conduct that aims to level the playing field along the grocery supply chain in Canada.
Last month, the Competition Bureau released a study saying Canada’s grocery industry needs more competition to keep food prices down.
The largest grocers have increased the amount they make on food sales in recent years, the bureau said, with the three biggest grocers collectively reporting around $3.6 billion in profits last year.
Food gross margins increased by a “modest yet meaningful” amount of one to two percentage points over the last five years, the study found.
Loblaw and Metro referred questions from Global News to the Retail Council of Canada. Empire did not immediately respond to a request for comment on the government’s announcement.
“We understand Canadians continue to struggle with the rising cost of living,” a spokesperson for Loblaw said in an email.
“Beyond the steps we’ve already taken to help, we are always open to discussions about what more can be done across the industry.”
Liberals face cost pressure
The food price plan was one of several announcements Trudeau made at the end of a cabinet retreat that was largely focused on addressing Canadians’ cost of living concerns.
Ottawa will remove GST on construction of new rental apartment buildings, and is also telling municipalities they must end exclusionary zoning and encourage building apartments near public transit in order to get federal funding through the Housing Accelerator Fund.
Trudeau also announced his government will extend the deadline for businesses to pay back loans granted through the Canada Emergency Business Account during the COVID-19 pandemic by one year, to the end of 2026.
But the Canadian Federation of Independent Business said the extension it has long called for was “not good enough,” noting the initial deadline for repayments that would forgive up to $20,000 of their loans was only extended by 18 days, to Jan. 18, 2024.
“The extension of the forgivable deadline by a few weeks will be of very little value to the thousands of small business owners who just don’t have money to repay now,” CFIB president and CEO Dan Kelly said in a statement.
Kelly said CFIB data suggests 69 per cent of small businesses in Canada that accessed loans through the CEBA have not yet been able to repay any of it back, and only 18 per cent have fully repaid as of this month.
The Liberals have seen slumping poll numbers that suggest Canadians believe the Conservatives would do a better job dealing with affordability and housing concerns.
Conservative Leader Pierre Poilievre has spent the summer touring the country hammering the government on economic issues and presenting his own plan to lower costs and build more homes.
In a press release the federal government also said it will take steps to “enhance competition across the Canadian economy,” giving the Competition Bureau the power to take action on corporations that work together to stifle consumer choice — specifically citing large grocery stores that have prevented competitors from setting up shop nearby.
— with files from the Canadian Press