Canada’s competition watchdog has emphasized the need for increased competition in the food and beverage industry, stating that it could help control inflation.
The Competition Bureau published its Retail Grocery Market Study Report, calling on the Canadian government to implement policies that support independent grocers.
The report highlighted that the three largest grocers in Canada, Loblaws, Sobeys, and Metro, collectively generated over CAD100bn ($75.6bn) in sales in 2022 and earned more than CAD3.6bn.
These grocers have faced accusations of artificially inflating prices. While Canada’s general inflation rate in May stood at 3.6%, grocery inflation was over double that at 8.9%.
In its report, which has been in progress since October, the Competition Bureau stated, “The price Canadians pay for groceries has been rising fast. We have seen a longer-term trend of Canada’s largest grocers increasing their profits on food sales.”
The bureau stressed the need for more competition as a key solution to address rising grocery prices in Canada. However, it acknowledged that entering the Canadian grocery industry is challenging.
The report recommended the establishment of a Grocery Innovation Strategy to support the emergence of new types of grocery businesses and expand consumer choice. It also advised provincial and territorial governments to introduce accessible and harmonized unit pricing requirements to help consumers compare prices and make informed purchasing decisions.
Additionally, the report suggested measures to limit property controls in the grocery industry, such as banning their use, to reduce barriers for new grocery stores to open and promote competition.
Lastly, the report called for heightened vigilance and scrutiny to promptly investigate allegations of wrongdoing in the grocery industry and have the power to take appropriate action.
Dr. Sylvain Charlebois from Dalhousie University’s Agri-Food Analytics Lab expressed the view that the report could have addressed the issue of price-fixing more directly.
The Retail Council of Canada argued that the report overlooked the stability of food margins and the fact that Canada’s food inflation is the second lowest in the world. The council attributed grocery price increases to global factors affecting inputs, such as war, extreme weather, and fuel prices, as well as supply chain disruptions and labor shortages.
While the council acknowledged that increased competition could lead to lower prices, it noted that foreign grocers are not entering the Canadian market due to the fierce competition already present among Canadian grocers.