Retail Council of Canada (RCC) is pleased to see that the Competition Bureau Retail Grocery Market Study Report did not make any finding that grocery profits have been excessive or that grocers have padded margins during this inflationary period. Indeed, the Bureau found grocer profit levels to be “modest”. The greedflation smear is officially dead.
The Canadian grocery market has always welcomed competition. There are no barriers that grocers themselves impose to new entrants wishing to get into the market. The Report indicates that foreign grocers may be holding off because they see how aggressively Canadian grocers compete on price and because Canada already has a well-established discount grocer market share. There is no better validation of this fact than the report’s own account that when foreign grocers were asked if they would come to Canada, their answer was that it would be difficult to compete on price.
There is a lot to digest in today’s Report and in doing so, we note that the report is deficient in some important areas:
- The focus isn’t on food specifically, but rather on the overall sales of grocers;
- It overlooks that food margins are stable and that Canada’s food inflation is the second lowest in the world;
- It doesn’t recognize that Canadian grocers – headquartered in Canada – create hundreds of thousands of jobs and invest significantly in the economy.
What the Bureau did find is that gross margins in grocery have seen modest improvements over time – in the 1 -2 per cent range since 2017, and still to a level of profitability in the 2%-5% range. This is the lowest of any other consumer-facing industry or any other part of the food supply chain.
Most increases come from pharma, health, and beauty as well as operating efficiencies. Food margins are either flat or down. The fact remains that grocery prices have gone up because of a confluence of global factors affecting grocery inputs: war, extreme weather, and soaring fuel prices, all piling on top of supply chain disruptions and labour shortages.
And so, the conclusion that we draw from the Report is something of a paradox: more competition could result in lower prices, but foreign grocers aren’t raising their hands to enter our market because Canadian grocers already compete fiercely on price.
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Senior Vice-President, Public Affairs