Canada’s Grocery Profiteers Have Got a Lot of Nerve

Canadian grocery giant Metro Inc. (TSX: MRU) released its quarterly earnings this past Tuesday, while also announcing that sticker price on their grocery items are going up.

Supplier costs are going up, you see, and the increases are “too high to justify…”

Canadian media is all over the maddening contradiction of grocery barons raising prices to pass supplier costs on to consumers while preserving their dividends. It’s a compelling story that affects everyone.

Blog.to did some tweet aggregation to give us a feel for just how pissed everyone is, and it seems as though even Dalhousie University “Food Professor” Dr. Sylvain Charlebois, who 11 months ago tried to convince his readers that the grocer’s profits’ portion of inflation wasn’t a big deal in the grand scheme, has apparently changed his mind.

We contend that Dr. Charlebois’ faith in FPC is misplaced.

Literally all of the discourse about grocery costs from government and media surrounds ways to get more competition into the grocery sector, now that an empty government threat to tax these companies’ surpluses last fall has been predictably abandoned.

It’s from this anemic middle position that the food-eating public, who ultimately fund these chain stores, will be dragged to a non-solution that allows for the continued harvest of their blood. Because nobody understands the lessons these companies are trying to teach us about setting a deep anchor.

Metro Inc. didn’t incrementally try to sneak the price hikes in here and there, hoping nobody noticed. It just told everyone their food prices were going up, and left them to deal with it.

Loblaw didn’t ask anyone if they were allowed to fence off a controlling interest in the country’s retail prescription drug market, they just did the deal with Manulife.

Empire didn’t ask anyone’s permission to buy up all of the grocery brands they could get their hands on, they just did it.

If consumers have a problem with any of that, it’s up to them to petition their government to try to drag those companies back from the positions they’ve staked out for themselves, and good luck with that. If Canadians want to take back control of their food costs, “maybe we need more competition,” is a terrible anchor. “You’re fired,” is a much stronger opening position.

Instead of giving away our money, how about we just keep it?

Some of our Eastern readers may not be aware that groceries can come from anywhere other than a corporate grocery store because, for them, they never do. The Deep Dive‘s West Coast Desk in Vancouver is also out of range of non-corporate grocery, just like most urban Canadian households. But much of the rural West knows first hand that there is a better way.

Map of regional Co-Ops in the Canadian Federation of Co-Ops, and patronage allocation by province clipped from Federated Co-Ops Limited. 2022 Annual Report.

At $12.5 billion in 2022 sales, Federated Co-Ops Limited are about one fifth the size of Loblaws by gross sales.

Co-Op grocery stores work much like any other business, except that they’re owned by their members. The members are locals who buy shares from the Co-Op that entitle them to annual patronage allocations based on the amount of money they spend at the Co-Op. The allocations are the equivalent to the money Empire, Loblaws and Metro distribute to their shareholders as dividends, but the members’ shares aren’t tradable capital instruments suitable for investment. Member shares are one-per-customer, and can only be sold back to the Co-Op treasury, usually when the member moves.

Canadian Co-Ops aren’t one big Co-Op, they’re a conglomerate of smaller Co-Ops who have formed a buying block that gives their member Co-Ops the same benefit that large grocery chains get from vertical integration and increased buying power. We last wrote about them this past fall, when their deli turkey was remarkably cheaper than the deli turkey at the local Loblaws affiliate.

Since then, Loblaws turkey has become more expensive, and Co-Op turkey has become even cheaper.

Also cheaper: lettuce…

…other kind of lettuce…

…chicken….

…and all kinds of other stuff.

Canadian law accommodates co-op businesses, and the prospect that they might become the only allowable structures for the grocery businesses would be a much greater concern to the country’s grocery lords than the notion of more for-profit competition.

The Food Professor’s observations last year that grocery stores weren’t the only industry bleeding the public, just the most visible, was spot on. A government (or aspiring government) interested in showing the electorate that they aren’t corporate shills might start making noise about how grocery profits can very easily be made to belong to the people who pay for them.

Traditionally, such an idea would invite backlash from corporate media but, considering the fact that most of this country’s news outlets are bleeding subscribers, they might want to pick their battles carefully. “Save grocery barons!” would be an embarrassing hill to die on.

A plan to make Co-Ops the only type of legal grocery business doesn’t have to succeed to work, it just has to get popular. The only sure way to make it less popular is to make groceries cheaper.

Loblaws’ store-brand bacon, which undoubtedly fetches a much higher margin than the brand name bacon, still costs more.

Information for this briefing was found via Sedar+, Reuters, Globe and Mail, and the sources mentioned. The author has no securities or affiliations related to the organizations discussed. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.

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