Grocery prices have increased at their fastest rate in more than 40 years and the largest grocers are making the most money in a concentrated market, a report from the competition regulatory body has said. While acknowledging that higher input costs, the Russia-Ukraine conflict and supply chain disruptions have contributed to price increases, the report also stated that Canada’s largest grocers increasing the amount they make on food sales pre-dates these events.
In its market study report ꟷ Canada Needs More Grocery Competition ꟷ released today the Competition Bureau recommends that all levels of Canadian government act to increase competition in the grocery industry.
“As we have witnessed the highest cost-of-living increases seen in a generation, Canadians are recognizing the relationship between a lack of competition and rising prices. By acting now, governments at all levels can take steps towards creating a more competitive grocery industry. Competition can help lower prices and make life more affordable for Canadians,” Commissioner of Competition Matthew Boswell said in a statement.
The report highlights the findings of the Retail Grocery Market Study that the Bureau launched on October 24, 2022.
“Canada’s grocery industry is concentrated,” the study report stated. “Most Canadians buy groceries in stores owned by a handful of grocery giants. In 2022, Canada’s three largest grocers—Loblaws, Sobeys, and Metro—collectively reported more than $100 billion in sales and earned more than $3.6 billion in profits.
The market study examines the state of competition in the grocery industry and identifies barriers to increasing competition. It also explores the potential for independent grocers, international grocers, and emerging business models to deliver more competition, innovation, and choice to Canadians.
Based on this report the Bureau makes four recommendations to “meaningfully improve competition in the grocery industry”.
It recommends creating “a whole-of-government strategy” to support the emergence of new types of grocery businesses. It also advises encouraging “the growth of independent grocers and the entry of international grocers” as well as introducing accessible and harmonized unit pricing requirements to empower consumer choice. Lastly it suggests limiting the use of property controls that make it difficult for new grocery stores to open.
The market study found that for new players and regional independents, the Canadian grocery industry is tough to break into.
“Canada is a big country and opening new grocery stores is expensive and difficult,” the report stated. “The industry’s big players operate thousands of stores and are well entrenched in the shopping habits of Canadians.”
In recent years, industry concentration has increased, and it has become more difficult than ever for businesses to enter, expand, and compete effectively. Furthermore, the price Canadians pay for groceries has been rising fast. Factors such as higher input costs, Russia’s invasion of Ukraine, and supply chain disruptions have contributed to recent increases in the price of food. But we have also seen a longer-term trend that pre-dates those events, of Canada’s largest grocers increasing the amount they make on food sales.
“Canada needs solutions to help bring grocery prices in check. More competition is a key part of the answer,” the Bureau concluded.
