The head of Canada’s largest grocery chain on Wednesday refuted claims that they profited from high inflation, telling lawmakers they weren’t the cause of soaring food prices, saying their profit margins were higher than ever. Claimed to be thin.
Sobeys, FreshCo, Farm Boy, Foodland, and other chains.
Medline was speaking to the Standing Committee on Agriculture and Agri-Food, which is investigating the causes of food inflation, which has surged to its highest level in decades.
Prices for food purchased at grocery stores rose 11.4% in the year to January, according to Statistics Canada. This is almost double the overall inflation rate of 5.9% over the same period.
Medline was summoned to speak, along with rival Rob Rose compatriots, led by Galen Weston, and Eric La Fleche, president and CEO of Metro, which owns Food Basics and other chains.
Together, these three grocery chains make up a large portion of Canada’s grocery industry, with thousands of stores nationwide. All three companies’ profits have risen sharply in the pandemic, but all three say food has very thin profit margins.
“It is silly to suggest that an unprofitable grocery business is somehow better for customers,” Medline said. I have.”
Weston argued that the increase in profits at Loblaws was primarily due to non-food sales, including Shoppers Drug Mart, the Joe Fresh clothing line of clothing, and discretionary spending in the financial services sector. bottom.
“It may come as a surprise, but grocery chains operate at very low profit margins, which means they have minimal impact on inflation,” said Weston, noting that the company’s grocery division has profit margins of around 4%, he added. Claims that stores can fix food price inflation are simply false.”
Loblaws Chairman and CEO Galen Weston testifies to a congressional committee hearing about rising food costs.
Weston cited his company’s highly publicized price freeze on thousands of No Name items over the holidays. Critics dismissed it as a publicity stunt, but Weston said the price freeze saved Canadians $45 million on cash registers in the three months it was in operation. also said the company opposed price increases by refusing to accept an “unjustifiable cost increase” of $500 million from its suppliers.
He singled out products such as milk, butter, some cheeses, and vegetable oils as products to sell at levels that would make the chain unprofitable, drawing customers into the store. “Interestingly, we lose money on every chicken breast we sell,” he told reporters at a scrum outside the committee hall.
“So no matter how many times I read it on Twitter, the idea that grocery stores are causing grocery inflation is not only false, it’s not possible,” he said. “Our retail prices aren’t rising faster than our costs,” he said.
La Flèche also claimed that his company’s food business is less profitable than it used to be.
“Our food margins are actually declining, but that’s offset by higher margins on pharmaceuticals,” he told the commission in French.
“Focusing on the grocery store will not solve the problem of food inflation because we are not causing it and we are not benefiting from it.”
“Earning too much”
Weston has been the target of many heated exchanges with NDP leader Jagmeet Singh, who have focused attention on the interests of Canada’s grocery sector for months.
Quoted by Shin Recent academic research papers Based on recent financial results, Loblaws was making about $1 million more profit per day than it did pre-pandemic. “How much profit is too much profit?” Shin asked Weston repeatedly.
“Reasonable profitability is a key factor in running a successful business,” Weston replied. He added that the company is reinvesting those profits into opening new stores and hiring more employees.
At a committee hearing, NDP leader Jagmeet Singh told Loblaws chairman and CEO Galen Weston about how his store is profitable at a time when many Canadians can’t afford groceries. I asked.
According to Stuart Smith, a professor at the University of Saskatchewan, consumers are noticing higher prices for food at grocery stores because they shop more often than other products.
“There’s certainly a little bit more inflation in the retail sector, but I doubt that’s the real driver of higher food prices,” he said in an interview with CBC News.
He said calls for a tax on the grocery sector’s excess profits are misplaced because it is the employees and investors who will pay the price. “We are facing the challenge of rising food prices, do you want to invest in companies that are not trying to maximize profits?”
