“Galen Weston is the poster boy for excess”: This economist blames supermarkets for astronomical food prices
Jim Stanford explains why corporate greed—not supply chain problems or inflation—is the reason for skyrocketing grocery bills
Since the start of the pandemic, major supermarkets have faced significant public backlash over the ever-rising price of groceries. Recently, the sense of resentment reached a fever pitch after Loblaws engaged in a Twitter spat defending itself against critics’ accusations of price gouging. The social media storm caught the attention of economist Jim Stanford, who runs a think tank called the Centre for Future Work. Here, he explains who he thinks is really responsible for astronomical food prices and what it would take for our grocery bills to come down.
How did this whole Loblaws Twitter controversy begin?
Last fall, the company announced a three-month price freeze on their No Name–brand products. It was part PR stunt, part defensive communications. They knew they were in the crosshairs of public anger, and they wanted to seem like they were on the side of consumers—even though their profits were exploding, up $682.8 million since 2019. But the price freeze didn’t really mean anything, since supermarkets often fix their prices during the holiday season to give shoppers a break.
Loblaws announced the end of the price freeze in late January. What happened next?
They faced some blowback on social media, with people accusing them of price gouging. Their choice to respond to critics directly on Twitter sparked a lot of anger. I was surprised that Loblaws thought debating would be an effective strategy. It made them look both defensive and incompetent, which is a bad combination.
We get it. It’s easy to blame grocers for higher grocery prices. But on a $100 grocery bill, our profit is less than $4.
— Loblaw Companies (@loblawco) February 1, 2023
Food inflation is a global issue. Suppliers are raising costs and it’s costing us billions more to put food on our shelves. This is where higher prices come from.
— Loblaw Companies (@loblawco) January 31, 2023
In one response, Loblaws wrote, “We may be the face of food inflation but we are certainly not the cause. Food prices are higher in our stores simply because the manufacturers who make the products are charging more for them.” Thoughts?
It’s self-serving bullshit. Loblaws is saying it’s an innocent intermediary, claiming it has no choice but to pass along the higher costs. That narrative is absolutely false. I’m not a specialist in the grocery industry, but I’ve looked at the power of supermarkets in the marketplace as part of the broader problem of inflation. I’ve gathered data on grocery store prices, profit margins and changes in the quantity of grocery sales. Supermarket profits are up 120 per cent since the beginning of the pandemic, and their profit margins have widened too, from an average of 1.65 per cent prepandemic to 2.8 per cent now. Food manufacturing profits are up 47 per cent in that same time period. Both industries have lined their pockets, but supermarkets more so.
You also have to consider the shrinking volume of sales. People are paying more even though they’re getting less groceries. Prices are so high that shoppers are stuck finding other ways to feed themselves, otherwise they’ll go hungry. In fact, there’s plenty of evidence that many Canadians are going hungry. Food bank usage is up, with 8.2 million Canadians expected to use food banks or other food-related programs in 2023, a 60 per cent increase from last year. There are also other signs of food stress in low-income Canadian households, including people skipping meals and children not getting proper nutrition.
Related: Daily Bread Food Bank CEO Neil Hetherington on why the charity is sending out a record 50 tonnes of food per day
So everything we hear about supply chain issues being the cause of price hikes is bogus?
Corporate pricing power—companies pumping their prices up, taking advantage of supply chain delays and consumer desperation—has been the key factor in the rise of inflation since the pandemic. It’s also happening in other sectors of the economy where companies provide essential services. Supermarkets aren’t the biggest culprit: we’ve seen even bigger price gouging in energy, oil and gas, banking, real estate, building products, and the auto industry.
The overall rate of inflation is slowing down. It peaked in June of last year at 8.1 per cent. Now, it’s at 6.3 per cent. But grocery store prices are up 11 per cent this year and 18 per cent over the past three years. Yes, the cost of producing and delivering food has gone up, for reasons including the pandemic, supply chain disruption, the climate disaster, and the energy crisis. But supermarkets are increasing their prices above and beyond those higher input costs, making food inflation much higher than it would be otherwise.
Will our grocery bills come down any time soon?
Supermarkets could start charging less for their products tomorrow and still make money. Are they going to? Probably not. They’re private companies trying to maximize profits for their shareholders. So what can the rest of us do? Not give three giant corporations—Loblaws, Metro and Empire (which owns Sobey’s)—that much power over the prices of the food that we eat. There are various ways to do that, including changes to anti-competition law that would target price fixing and collusive behaviour, like the kind we saw in the bread price-fixing scandal of 2017.
We could also implement excess profit taxes for supermarkets and other companies earning all-time record profits during our continuing economic recovery from the pandemic. If we can’t stop them from overcharging in the first place, we could at least redistribute some of the profit.
Another reason supermarket profits are so high is because labour costs are so low. These companies hailed grocery store clerks as heroes during the pandemic, giving them a $2 pay raise, then quickly took it away. We should support those workers by helping them advocate for higher minimum wages and stronger union contracts.
This week, you’re speaking on a House of Commons panel investigating how grocery profits are connected to food price inflation. What kind of outcome are you hoping for?
The committee could make recommendations to government regulators to address supermarket profits. I’m going to run over the basic facts and figures, showing how profits are up—and CEO compensation is very high—while Canadians can barely afford to buy groceries. Galen Weston is the poster boy for supermarket excess. In 2022, his salary was $730,000, his bonus was $2.2 million and his stock-option awards were valued at $2.5 million, as his family’s stake in the company rose higher than $10 billion.
Corporations with strategic positions in the supply chain have been able to leverage the chaos and destruction of the pandemic into record profits. Their stock market value is proof of that. If they were innocent intermediaries, caught in the middle, why are investors so keen to buy and hold their shares? Those investors know that supermarkets are money-making machines. But we shouldn’t take that for granted.
This interview has been edited for length and clarity.