Guest column: Are grocers colluding on prices we pay?
Are grocers colluding?
The food inflation rate in Canada has exceeded our country’s general inflation rate for 10 straight months now. The food inflation rate in September was 10.3 per cent, according to Statistics Canada’s most recent Consumer Price Index.
Since Canadian grocers are once again facing a barrage of criticism coming from concerned Canadians, some have started to respond.
Loblaws’ announcement this week to launch a large price freeze campaign received mixed reactions from Canadians. While some welcomed the campaign, many still remembered the bread price-fixing scheme which unfolded a few years ago and understandably reacted to Loblaws’ announcement with great skepticism.
Consumer trust was severely damaged at the time which makes the criticism grocers are now facing undoubtedly deserved.
Still, Loblaws’ campaign will continue for more than 10 weeks, including the highly lucrative holiday season. It’s unclear whether consumers will save or how much they will be saving, but at least the campaign will bring some predictability for grocery shoppers and provide some immunity against sticker-shock.
We have all suffered grocery sticker-shock many times over the last several months.
But reactions by other grocers may have made things worse. The competition, which includes both Sobeys and Metro, was clearly caught off guard by Loblaws’ announcement. While Sobeys opted to showcase some of its current promotions, Metro decided to go on the attack and made it a “hold-my-beer” moment.
Metro stated: “It is an industry practice to have a price freeze from Nov. 1 to Feb. 5 for all private label and national brand grocery products and this will be the case in all Metro outlets.”
Wait, what? Metro clearly wanted to undermine Loblaws’ campaign by stating freezing prices this time of year was nothing out of the ordinary and normalize what appears to have been a long-standing, industry-wide, price freeze practice.
By doing so, without even giving it a second thought, Metro was inferring that it was colluding with other grocers.
Loblaw quickly denied everything. In the end, Metro issued another statement a day later clarifying its position on price freezes.
Many in the industry are familiar with seasonal cost management practices. Grocers will be inclined to accept cost increases during certain periods of the year. The so-called “blackout” periods will get grocers to reject cost increases. These are known practices.
But what Metro was suggesting is much more troubling. The company’s statement essentially implied seasonal collusion has impacted the price of privately-labelled food products for years. This is what collusion typically looks like.
This is reminiscent of the bread price scandal which lasted 14 years in Canada with nobody fined or jailed.
Metro’s statement was likely issued in haste to respond to media requests. Still, it appeared as though Metro did not even understand how incriminating the statement was to itself and the entire industry which may indicate a much larger issue at hand.
Almost four out of five Canadians believe greed is inflating food prices at the grocery store. Metro’s statement certainly did not help.
Supported by a unanimous parliamentary vote, Ottawa will launch its investigation into food prices and inflation in the weeks to come. The Standing Committee on Agriculture will need to get to the bottom of Metro’s statement and what it implies for the industry and consumers.
Beyond that, the committee also needs to appreciate that greed can be harboured anywhere within the food chain, from farmgate to table and not just in retail.
Retail prices for some verticals like dairy, meat, and bakery have shown erratic patterns in recent years. We shouldn’t be surprised the meat packing industry is currently subject to two class-action lawsuits in both Quebec and British Columbia.
The Competition Bureau needs to provide more proactive oversight on what is happening across the food spectrum.
Targeting grocers exclusively would be like blaming the waiter at a restaurant when your dish is undercooked or just generally subpar. Let’s hope the committee will commit to looking at legitimate root causes and not just at populist targets to score political points.
But given what happened with Metro in recent days, grocers are simply not helping their cause.
Sylvain Charlebois is a professor and senior director of the Agri-Food analytics lab at Dalhousie University.