Experts: Presence of American stores not to blame for inflation
The presence of American retail giants such as Walmart and Costco in Canada is unlikely to cause higher food prices, experts say.
That’s despite Canadian grocery chain executives asking the MP to question those retailers as part of an investigation into food inflation.
University of Toronto economist Ambarish Chandra called the ongoing hearings by a congressional committee investigating the issue “actionable,” with all retailers pledging efforts to minimize price increases. He said he was trying to maximize profits despite the fact that
“It’s easy to call foreign companies and have them explain why they’re letting hard-working Canadians go,” Chandra said.
“It’s not that American grocers use Canadians and Canadian grocers don’t. Grocery stores charge what the market can bear.”
His remarks come at a time when Canadian grocers and consumers are under pressure as food prices continue to soar despite an overall easing in inflation in recent months. .
Grocery prices were up 10.6% in February compared to a year ago, with overall inflation at 5.2%. Grocery inflation eased from an 11.4% year-on-year rise in January.
Gonzalo Guevara, president and chief executive officer of Walmart Canada, told a congressional committee on Monday that his company is not looking to profit from food inflation, but rather to sell its own products versus those sold by competitors. He claimed that he was trying to maintain a price differential with
Gross margins and total operating profit in dollars for Walmart Canada’s food business declined last year, he added.
Gebara’s testimony follows a much-anticipated March 8 board meeting where the heads of two of Canada’s three largest grocery chains, Metro Inc. and Empire Co. He questioned why lawmakers did not ask major U.S. retailers to answer survey questions. food inflation.
The committee then unanimously agreed to invite the leaders of the Canadian branches of Walmart and Costco.
Pierre Riel, Costco’s senior vice president and Canada country manager, is scheduled to meet on the committee on April 17.
Canadian grocers, including Loblaw chairman and president Galen Weston, told the commission earlier this month that food inflation was not driven by profit margins, arguing that margins on food remain low. bottom.
However, Chandra said framing is simply “window dressing.”
“Frankly, we’ve seen bad behavior from these grocery stores over the years. There’s just not enough competition,” he said.
“We need to look at encouraging competition. One way to do that is to actually have more foreign grocery stores in the country. So Walmart’s presence is good for Canada in the long run. This is not a bad thing.
Simon Somogyi, an agribusiness researcher at the University of Guelph, said Walmart and Costco are bigger companies than Canadian grocery stores, so they can source more products and ultimately sell at lower prices. Added.
“Including them in our retail environment is important, allowing consumers to choose where they want to put their money,” he said. “
He said he would “welcome any competition that can enter the market” to keep costs down.
Grocery bills are still rising due to factors such as high shipping, packaging and labor costs and historically high commodity prices, but experts say rising food prices will normalize by the end of 2023. He said he expects to.
At the ongoing committee hearings, Somogyi said the public would benefit if there was more transparency about the mechanisms leading to higher costs for suppliers.
“The hearings we’re seeing are about why prices are going up from a consumer perspective. More discussion about how suppliers are priced. I kind of hoped that it would be done,” he said.
“The two are related, but a lot of the plays we’ve seen at these hearings don’t get to the bottom of it.”
This report by The Canadian Press was first published on March 29, 2023.