grocery store produce section

Inflationary year was a great one for grocery chains, report finds

Food prices are shooting up. Inflation is increasing costs in all areas of food production, from farming to distribution, but there may be another factor at play. Critics have accused grocery chains of “greedflation” and hiking up food prices during a period of high inflation for the sake of profiting off of consumers who have limited options when shopping. True or not, it’s undeniable that they have been doing well lately in the U.S. and Canada. Canada’s three major supermarket chains all surpassed their average profits this year, according to the Agri-Food Analytics Lab at Dalhousie University. Loblaw, in particular, made $1 million of “extra” profits per day in 2022.

The Reason for the Rising Food Prices

Due to these notable profits, the Competition Bureau of Canada launched a study on grocery store competition. They will investigate inflation’s effect on grocery prices, which has made products more expensive for grocers to buy and sell. However, they will also look into the claim that grocers are inflating their prices for profit because of the lack of competition. The bureau plan to publish their findings in 2023. [1]

In that vein, according to the Consumer Price Index, inflation rose 11.4% from September last year due to raised prices of food, rent, and medical care. Food has become more expensive for many reasons, like raised gas prices and labor shortages, which are increasing business costs. The war in Ukraine has interfered with many exports, including wheat and sunflower oil, further driving up prices. At the same time, weather-issues like droughts have lowered crop yields. So these heightened costs have been passed to consumers. [2]

Raad: Debate Over Whether It’s Cheaper To Leave Heating Constantly On Has Been Solved

Advertisement

To learn more, the Toronto Star investigated the financial statements of the three main Canadian chains: Loblaw Companies Ltd., Empire Company Ltd., and Metro Inc. They found that their profit margins are rising, suggesting that the grocers are raising prices to account for their increased costs — plus some extra. 

“Yes, some prices are rising because of problems in global supply chains. That is absolutely happening,” said DT Cochrane, an economist with Canadians for Tax Fairness. “But some prices are rising because corporations are jacking up their markups to serve their bottom lines. There’s a very simple reason for this inflation, for this affordability crisis: It’s because corporations are taking the opportunity to raise prices. The people who set the prices are setting them higher.” [3]

Advertisement

Inflation is a global issue

However, it’s difficult to know conclusively the reason for these prices, since companies are allowed to report financial statements with similar segments lumped together. For example, Loblaw can publicize their retail sales while lumping sales from grocery stores and drugstores, which would include health, beauty, and other general products. So it’s unclear if the increased profits came from food or other items like makeup. Therefore, the authors of the study from Agri-Food Analytics Lab may suspect greedflation but don’t have conclusive data. At the same time, the chains deny the change in profit margins, saying their profits are the same. 

Loblaw vice-president Catherine Thomas said that retail is often blamed for inflation but they aren’t the cause. “Inflation is a global issue, not a uniquely 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 that looks at food prices without looking even one step further up the chain, including the major price increases from global manufacturers.” [4]

Read: Woman Who Spent $220 On Food In The Whole Of 2021 Shares How She Did It

Advertisement

A similar argument continues in the United States, where inflation increased food prices by 13% from last year, according to the Bureau of Labor Statistics. And in mid-October, PepsiCo reported its third-quarter profit had increased by over 20%. Bear in mind, their prices for products like chips and drinks had upped 17% in the fourth quarter of last year. Similarly, Coca-Cola reported a 14% profit increase from last year. 

The recent earnings calls have only reinforced the familiar and unwelcome theme that corporations did not need to raise their prices so high on struggling families,” said Kyle Herrig, the president of Accountable.US, an advocacy organization. “The calls tell us corporations have used inflation, the pandemic and supply chain challenges as an excuse to exaggerate their own costs and then nickel and dime consumers.” [5]

Advertisement

How to Manage Rising Food Prices

But while some people can manage the increased prices, many cannot, forced to shop at lower-price grocery stores and skip foods that have become too expensive. For instance, in the U.S., cereals and bakery goods have risen 16.2% from last year, dairy has risen by 15.9%, and eggs are up 30.5%. And not all companies profit from this inflation, like the meat and fish industry, since shoppers buy less of these products because of the high prices. 

Experts are offering some strategies on how to deal with the rising food prices. One idea is to stock up on basics in order to buy less new items each week. This can include pasta, rice, bread, potatoes, canned goods, frozen vegetables, and eggs; they can create meals on their own or be the basis for many other cost-effective meals.

Additionally, always shop with a grocery list and a plan for what you’ll be cooking. Meal-planning could reduce costs and help repurpose leftovers, like turning leftover meat and veggies into a soup or casserole. You can also compare prices of different stores to see which one offers the best value on the item you’re looking for, which can be especially helpful when buying staple items or produce. [6]

Keep Reading: Experts Warn of ‘Tripledemic’ Threat This Season

Advertisement

Sources

  1. “Backgrounder: Market study of retail grocery competition in Canada.” Competition Bureau Canada. October 24, 2022
  2. “Why food keeps getting more expensive.Vox. Madeleine Ngo. October 13, 2022
  3. “Supermarkets are hiking prices faster than necessary — and profiting from inflation, Star investigation suggests.” The Star. Marco Chown Oved. July 18, 2022
  4. “Loblaw tops big Canadian grocers in profit reports amid inflation surge: analysis.” Global News. Brett Bundale. November 3, 2022
  5. “Food Prices Soar, and So Do Companies’ Profits.New York Times. Isabella Simonetti and Julie Creswell. November 1, 2022
  6. “‘Food at home’ prices are up 13% from last year: Here are 4 ways to save on groceries.CNBC. Annie Nova. October 14, 2022
Advertisement