Canada's top 3 grocers posted higher profits this year compared to 5-year average: report

Canada’s three largest grocers have all posted higher profits this year compared to their average performance over the past five years, according to a new study from Dalhousie University.

Critics have accused the grocers of so-called greed, suggesting they are profiting at a time when food prices are rising at the fastest rate in more than 40 years, and the researchers say the lack of transparency in their findings financial does not help.

“These businesses are massive and quite diverse from a retail perspective, so we recommend separating food sales from other sales,” said Sylvain Charlebois, co-author of the report from the Agri-Food Analytics Lab. food and Dalhousie teacher.

Loblaw Companies Ltd. was particularly notable, according to the report, as it not only exceeded its five-year average performance, but did better than any of those years individually.

The grocery chain’s gross profit in the first half of 2022 beat its previous best by $180 million, which equates to about $1 million more per day, according to the research.

By comparison, Metro Inc.’s recent gross profit was $11 million below its best performance in five years, while Sobeys Inc.’s parent Empire Co. Ltd. made $37 million. dollars less in the first half compared to its best results, the report said.

But the report’s authors said the lack of more detailed financial data makes it difficult to explain why the three supermarket companies are outperforming their average performance this year.

“We wanted to see if grocers took advantage of periods of high inflation to charge an excessive amount of money for food,” said Samantha Taylor, senior accounting teacher at the Rowe School of Business at Dalhousie and co-author of the report. .

“But it’s not conclusive. We don’t have that data.”

According to International Financial Reporting Standards, listed companies may group operating segments with similar characteristics.

Loblaw’s retail segment, for example, includes sales from grocery stores, drugstores, including its Shoppers Drug Mart chain, and other health, beauty and general merchandise sales.

It is therefore unclear whether the growth in sales is due to food or other items such as baby clothes or makeup.

Charlebois said the report’s findings underscore the need for greater transparency in Canada’s food sector.

“Selling food is not the same as selling lipstick.”

It’s entirely possible that consumers are spending more money on products that have a higher gross profit margin like cosmetics and apparel, Taylor said.

“It’s also possible that grocers have increased their margins on food. We just don’t know.”

The report comes as food inflation in Canada continues to soar. Grocery prices jumped 11.4% in September from a year earlier, the biggest increase since 1981, according to Statistics Canada.

Soaring food prices prompted Canada’s Competition Bureau to launch a study on competition in the grocery industry.

But grocers defended their profits, saying their margins had not changed.

Loblaw Vice President Catherine Thomas said retail is “the face of inflation, but we are not the cause.”

“Inflation is a global issue, not just a Canadian one, and the price on our shelf represents many costs and many companies up the supply chain,” she said. “This is one more study looking at food prices without looking even one step further up the chain, including major price increases from global manufacturers.”

Loblaw’s profit margin on food has held steady since inflation set in, Thomas added.

Charlebois suggested that the best way for Loblaw to defend its position would be to release the full data.

“On one side you have people trying to scapegoat and pointing fingers at grocers,” he said. “On the other side, you have grocers who are defending themselves but without really much transparency.”

Metro’s vice-president of public affairs and communications, Marie-Claude Bacon, said the Montreal grocer’s gross profit margins have been stable for many years.

“Despite the misleading claims of some, we work hard every day to bring value to our customers and help them in the current global inflationary environment,” she said.

Sobeys did not immediately respond to a request for comment.

National spokesperson for the Retail Council of Canada, Michelle Wasylyshen, said that while overall grocer revenues have increased during the pandemic as more people eat at home, profit margins have been relatively consistent.

“The grocery industry is a relatively low-margin business,” she said. “Typically, grocery store profits are three or four percent of revenue.”

The overwhelming driver of price increases on store shelves is the unprecedented price increases that grocers themselves are facing from their suppliers such as food manufacturers, processors and wholesalers, Wasylyshen said. .

Canada also has lower food inflation than many other countries, with food price increases reaching 13% in the US and 14.5% in the UK, she said.

This report from The Canadian Press was first published on November 3, 2022.