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Published: March 30, 2023
Experts said that the Canadian presence of American retail giants such as Walmart and Costco is unlikely to be the reason for the rise in grocery prices.
This is despite Canadian grocery chain executives pressing MPs to question retailers as part of their study on food inflation.
For his part, Ambarish Chandra, an economist at the University of Toronto, described the ongoing hearings before a parliamentary committee studying the issue as "procedural," saying that all retailers seek to maximize profits despite their declared efforts to curb price increases.
Chandra added: "It's easy to call foreign companies and make them explain why they deceive hard-working Canadians. It's not as if American grocers are taking advantage of Canadians while Canadian sellers are not. Grocers will charge what they can get, and what the market will bear."
His statements come at a time when Canadian grocery stores and consumers are under pressure as food prices continue to rise despite a decline in overall inflation in recent months.
Grocery prices also rose by 10.6 percent in February compared to last year, while overall inflation was 5.2 percent. The grocery inflation rate dropped from 11.4 percent year-over-year in January.
In the same context, Walmart Canada President and CEO Gonzalo Gebara told the parliamentary committee on Monday that his company is not trying to profit from food inflation, and instead insisted that it strives to maintain a price gap between its products and those sold by its competitors.
He added that Walmart Canada's gross profit margin for its grocery business and its total operating profits in dollars declined last year.
Gebara's testimony came following a highly anticipated committee meeting on March 8, where the heads of Metro Inc and Empire Co, two of Canada’s largest grocery chains, questioned why MPs had not invited American retail giants to answer questions in their research on this matter.
The committee then unanimously agreed to invite the leaders of Walmart and Costco Canada to speak.
Pierre Riel, Costco's Senior Vice President and Country Manager for Canada, is scheduled to appear before the committee on April 17. A spokesperson for Costco did not respond to a request for comment on Riel's upcoming appearance.
Canadian grocers, including Loblaw President Galen Weston, also told the committee earlier this month that food inflation is not driven by profit promotion, and insisted that their food margins have remained low.
But Chandra said the framing is just "window dressing."
Simon Somogyi, a researcher in agricultural business at the University of Guelph, added that Walmart and Costco are bigger companies than Canadian grocers, giving them the ability to procure products in larger quantities, which ultimately allows them to sell at lower prices.
Factors such as rising delivery, packaging, and labor costs, along with historically high commodity prices, continue to contribute to increased grocery bills, but experts said they expect food price increases to return to normal by the end of 2023.
If the ongoing hearings result in increased transparency regarding the mechanisms that lead to increased costs for suppliers, Somogyi said that will benefit the public.
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