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As food prices rise, many are quick to blame grocers for profiteering and taking advantage of consumers. The notion of “greedflation” has emerged as one of the most talked about issues in the last month. Food inflation in Canada is at a 41-year high, at 10.3%, and chances are that consumers won’t get a break anytime soon.

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It is difficult to determine whether grocers have been inflating prices to benefit their bottom line. If greed exists in our grocery sector, how do we measure it? Well, our lab tried.

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In a recent report, we used publicly available data to look at the gross profit (revenue minus cost of revenue) for each of the three big Canadian grocers: Empire/Sobeys, Metro and Loblaw. We then calculated their respective “best” and “average” performances for the past five years. Next, we compared each company’s two most recent quarters of 2022 against their best and average years’ performances and quantified the excess (deficit).

Empire/Sobeys’ performance in 2022 was over-performing relative to its best years in Q2 by $7 million, while their Q3 numbers had it underperforming by $44 million. For the most recent two quarters of 2022, Empire/Sobeys had a net deficit of $37 million relative to its best years’ performances. Metro’s 2022 performance, on the other hand, relative to its best years, over-performed in Q1 by $3 million and under-performed by $14 million in Q2. For the most recent two quarters of 2022, Metro Inc. had a net deficit of $11 million relative to its best years’ performances. Nothing overly scandalous.

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Loblaw, though, is an exception. In Q1 of 2022, Loblaw outperformed its best years’ performances, equivalent to $68 million; in Q2 2022, it outperformed its best years’ performances by $112 million. So Loblaw’s gross profit thus far in 2022 outperforms its best performances of the past five years by $180 million, or about one million dollars a day to date.

Does this mean Loblaw is greedy? Not quite. Loblaw’s reported revenues combine food, health, beauty, apparel and other general merchandise into one category. Grocers are incredibly diversified and sell cosmetics, drugs and clothing.

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We find it interesting that Loblaw can justify food and non-food (health care, beauty, apparel and other general merchandise) as a combined operating segment. It is unclear how food retail and drug retail are similar in nature, sales or production. Canadians deserve to be informed of the details, especially when food inflation is in the double digits. This is worth investigating.

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Still, the blame game continues and Canadians want a scapegoat, which points to another change required, which has to do with the Competition Bureau. The Bureau has constantly failed the Canadian public by not providing forceful support to Canadian lawmakers by simply endorsing acquisitions and overseeing investigations with little or no vigour. The bread price scandal is a good example. The anger directed toward grocers is truly unique to Canada. Our nation may be experiencing a consumer trust crisis that is spilling over into our relationship with grocers due to the Competition Bureau’s baggage, that is, the awkward unfinished business it has with many files. Canadian consumers feel grossly unprotected.

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In the U.S., things are different. Their inherent hatred for monopolies and oligopolies has pushed lawmakers and bureaucrats to act swiftly and forcefully. Kroger is currently trying to acquire Albertsons for almost $25 billion. The deal is hitting major regulatory roadblocks. Kroger could be asked to let go of almost 400 stores, creating a rival to the new grocer. The initiative led by lawmakers has been relentless, and yes, politicized.

This would never happen in Canada. When Loblaw acquired Provigo in 1998, when Metro acquired A&P in 2005 or when Sobeys bought Safeway out west, barely anyone raised an eyebrow during the proceedings.

More financial data to clarify food sales and a more authoritative watchdog in the Bureau, industry and grocers may be the only way to get consumers’ trust back.

— Dr. Sylvain Charlebois is a professor in food distribution and policy at Dalhousie University. Samantha Taylor is a professor in accounting at Dalhousie University.

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