Juno News - “Corporate greed” isn’t why groceries are so expensive

00:00:00.000 Grocery prices are out of control in this country, but left-wing politicians just keep shifting the

00:00:04.900 blame and pointing the finger instead of taking responsibility. I'm Jasmine Mullen and it's time

00:00:10.020 for a reality check. On this week's show, we're going to be talking about the prices of groceries

00:00:21.520 in Canada because prices are out of control. If you've been in a grocery store recently,

00:00:26.240 you'll know this. For example, over the past year, the price of cereal is up 18%, baked goods are up

00:00:33.040 15%, fresh fruit is up by 13%, fresh vegetables up by 12%, dairy products up by 10%, meat prices are up

00:00:42.420 by 8%, and the list goes on. So what's going on? Why are groceries so expensive? Here are some

00:00:48.480 explanations from some of Canada's left-leaning politicians in government. You're probably

00:00:52.840 wondering what the heck is greedflation and why should I care? It's what's driving up the cost

00:00:59.620 of living, groceries, gas, and literally everything else. It's inflation driven by corporate greed,

00:01:09.900 aided and abetted by establishment liberals and corporate conservatives in Ottawa. One of the major

00:01:16.460 drivers of inflation is corporations making record profits by hiking up prices far above the cost of

00:01:25.100 production. Meaning CEOs are using the cover of inflation to take more money out of your pocket

00:01:32.540 and stockpile their wealth. Mr. Speaker, inflation is a worldwide problem right now, but it is a challenge

00:01:39.760 faced by Canadian families that we will continue to support them through. That's why we're delivering

00:01:45.020 supports for families right now in a targeted way, a doubling of the GST credit that will arrive in

00:01:51.520 the coming weeks in their bank accounts, moving forward on support for dental care, moving forward

00:01:57.180 on support for low-income renters, things that the Conservative Party is continuing not just to vote

00:02:02.140 against but to block, and we will continue to do more. We will continue to be there for Canadians

00:02:07.720 during the challenging times ahead because that's what Canadians expect of their government.

00:02:12.300 So in that clip, we just heard from federal NDP leader Jagmeet Singh. He thinks groceries are

00:02:18.180 expensive in Canada because of corporate greed. He's dubbing it greedflation. Whereas the liberals,

00:02:23.800 we heard from Justin Trudeau there, he's the federal liberal leader, the prime minister in Canada,

00:02:28.460 just said that the real reason that groceries are expensive is because of global inflation. Again,

00:02:34.460 he's really emphasizing that inflation is a global phenomenon, and that's what's causing costs to go up at the

00:02:41.180 grocery store. This show is about debunking leftist myths. So let's get started by debunking these two ideas

00:02:47.060 that the real reason that groceries in Canada are expensive is because of corporate greed or global

00:02:52.140 inflation. So let's tackle first this idea of greedflation. Federal NDP leader Jagmeet Singh says that

00:02:59.220 corporate greed is the reason that groceries are so expensive in Canada. But on its face, this is really

00:03:04.100 questionable because where was corporate greed before the pandemic? Why is corporate greed only an issue

00:03:09.980 now? Did COVID-19 cause certain corporate executives to become more greedy or care about profits more

00:03:17.900 than before the pandemic? So in 2019, they weren't greedy. And now in 2022, they're extra greedy. It just

00:03:24.000 doesn't make sense. What's really happening here is that NDP leader Jagmeet Singh is trying to score some

00:03:29.300 cheap political points because already Canadians have lost some trust in grocers after there was

00:03:35.720 allegedly some collusion going on. So Canadians' trust in grocers is already somewhat compromised.

00:03:42.380 Now, while it's true that grocers in Canada have enjoyed record profits during the pandemic,

00:03:48.280 record profits are not proof of profiteering. Here's why. The NDP is only looking at the dollar amount

00:03:55.820 of profits that these grocers have earned. But a more fair metric to determine if they were

00:04:00.600 profiteering would be to look at their profit margins. If their profit margins had increased

00:04:05.540 greatly during the pandemic, then you could rightfully make an argument that yes, they're

00:04:10.820 profiteering. But a report from Dalhousie University's Agri-Food Analytics Lab produced a report analyzing the

00:04:17.300 claim that greedflation is driving the cost of groceries in Canada, and it concluded the following.

00:04:22.900 Indeed, revenues have increased dramatically, but so have the cost of goods sold. Since the start of

00:04:29.860 the pandemic, while revenues did go up, gross margins have remained relatively consistent

00:04:35.680 throughout. If quote unquote greedflation exists, the available data suggests grocers are not

00:04:42.800 responsible. So essentially what's happening here is that for grocers, the cost of the products that

00:04:47.740 they're buying are increasing. So even though they're maintaining pretty consistent profit margins,

00:04:53.180 their total profit dollars have increased. So critics might now argue that, okay, well,

00:04:58.240 if your profit dollars are so high, then why don't you decrease your profit margin? But what they might

00:05:04.480 not understand is that grocery retailers actually face some of the lowest margins of any retail sector

00:05:10.980 in the country. Loblaws, for example, which is one of the largest grocery chains in the country,

00:05:15.620 their profit margin was actually just 3.6% last year, which is razor thin. That's why you see in

00:05:24.420 the grocery sector, it really is a volume play. If you're only making 3.6%, that's not a lot of

00:05:30.160 margin for error. And actually, conveniently, Jagmeet Singh avoids the fact that Loblaws own

00:05:36.080 Shoppers Drug Mart. And the CFO, the chief financial officer at Loblaws, clearly stated that part of the

00:05:42.180 reason why their profits increased during the pandemic was that at Shoppers Drug Mart in their

00:05:46.740 drug retail section, they had much higher margins on services like vaccine delivery for the COVID-19

00:05:53.700 vaccine, as well as COVID-19 testing. And I haven't heard the NDP leader complain that they administered

00:05:59.060 either of those services during the pandemic. And presumably, it was the federal government that

00:06:03.440 negotiated those rates with private drug retailers. So the finger points back at the government on that

00:06:08.300 one. So if gross margins on food retail remained pretty well stable throughout the pandemic,

00:06:13.800 it's really difficult to make the case that grocers were gouging consumers. If anything,

00:06:18.940 the question should be, why did their costs go up? Why is food becoming more expensive for them to buy?

00:06:25.380 And in that case, the fingers point back at the government. But again, we'll get to that later.

00:06:28.980 Let's move on now to the liberals argument, which is that inflation is a global phenomenon,

00:06:34.180 we're not responsible for it. So we actually did a reality check episode on this question of

00:06:39.180 why the government is responsible for inflation. And it's called five government claims about

00:06:44.980 inflation debunked. Check out that episode because it was really good. And it does go through

00:06:49.520 all of the reasons why, yes, in fact, the Canadian government is responsible for inflation in this

00:06:55.160 country. But the easiest way to debunk the liberal statement that inflation is a global phenomenon,

00:07:00.300 and that's what's causing food prices to go up is that actually in Canada, inflation has been

00:07:06.180 decreasing over the last three months. And despite this, food prices continue to climb. That's right,

00:07:13.360 Canadian inflation is decreasing, yet food prices continue to go up. The government itself even

00:07:18.340 admits that food price inflation rose to 11.4%, while the CPI consumer price index dropped to 6.9%

00:07:26.880 in August. So clearly, neither of these excuses hold up pointing to corporate greed or global

00:07:33.740 inflation are really convenient excuses for the government because then that way they don't have

00:07:38.900 to accept any of the blame for rising grocery costs in Canada. But they should because a lot of their

00:07:44.660 policies are responsible for creating the high cost of groceries in this country and exacerbate the

00:07:50.180 situation. So now let's look at some of the ways that the government's responsible for creating

00:07:54.720 expensive groceries in Canada. The first and most obvious thing that we need to talk about is the

00:07:59.980 lack of competition in Canada's grocery sector. The government should absolutely be looking at how

00:08:05.480 its own policies create barriers to entry in this sector and look at ways that they can spur competition

00:08:10.860 to lower prices for consumers. Shockingly, in Canada, three major grocery chains own 75% of the

00:08:18.360 market share in that industry. So if you're watching on YouTube, I'll put up this little chart that's

00:08:22.700 really helpful. Loblaws is the biggest of the major grocery chains. They own about 37% of market share

00:08:29.800 in that sector in Canada. And they own companies like Loblaws, obviously, Zares, Independent, Value Mart,

00:08:38.220 you might know No Frills. Then next is Empire Company Limited. They're about 28% market share in Canada.

00:08:46.080 They own Sobeys, Safeway, IGA, Foodland, etc. Farmboy, Longos, you probably recognize a number of those

00:08:54.300 brands. And then the third company that owns a significant share of the market in Canada at about

00:09:00.460 10.4% is Metro. And they're more prevalent on Canada's East Coast. To the government's credit,

00:09:06.720 the Competition Bureau of Canada is actually launching a review into competition in Canada's grocery sector.

00:09:12.460 And part of that will involve examining how can governments lower barriers to entry and expansion

00:09:17.840 to stimulate competition. So while it's a good thing that the government should always be questioning

00:09:23.180 how they are themselves creating barriers to entry for competitors in that market, because

00:09:28.660 obviously competition will be a good thing for Canadian shoppers, they may at the end of this

00:09:33.320 exercise, which is set to conclude in June 2023, they may be a bit disappointed if they don't have some

00:09:39.560 sort of smoking gun revealing some big greedflation scheme. But rather what's obvious now, which is

00:09:46.620 that grocers are experiencing higher costs from the people that they're buying their food from, which

00:09:51.740 means higher profits for them, even though they're keeping a stable profit margin. But beyond increasing

00:09:57.360 competition in the grocery sector, the government of Canada has a lot of specific policies that drive up

00:10:03.680 costs of groceries. Ultimately, it comes down to the fact that grocery stores are businesses, they're

00:10:09.340 not charities, so they have to guard their margins. Now, as we've already discussed, their margins stayed

00:10:15.200 relatively stable throughout the pandemic. But what caused their profits to increase was because the

00:10:20.860 cost of the food products that they were buying had increased. And because they're businesses, not

00:10:26.220 charities, they're not just going to absorb these costs and lower their already razor thin margins,

00:10:31.820 what they're going to do is pass these increased costs on to customers. So how does the government

00:10:37.520 raise the food prices that the grocers themselves are incurring from the people they buy these products

00:10:42.960 from? The main way that government policies drive up food costs is by driving up the cost of energy,

00:10:48.840 which impacts the cost of everything. According to the government of Canada itself,

00:10:54.060 supermarkets are among the most energy intensive commercial buildings. Their high energy consumption

00:10:59.580 is largely attributed to refrigeration and heating and cooling equipment. Energy costs are typically

00:11:05.960 about 1% of sales. So if we look at Loblaws last year, if we look at their financial statements,

00:11:12.100 in 2021, they did about $53 billion in revenue. So if energy costs, as the government says, make up about

00:11:19.960 1% of their total sales, then that means that $530 million from Loblaws went to pay just for their energy

00:11:29.160 costs. Again, these are not costs that are just going to be absorbed by a business. They're a business,

00:11:34.040 not a charity. They pass costs onto their customers. So that extra half billion dollars that they spent

00:11:40.620 on energy is all being paid for by their customers. This should be obvious to everyone, but apparently

00:11:46.660 it isn't for politicians. So let me spell it out. Increasing the cost of energy increases the cost

00:11:52.640 of groceries. Specifically, government policies such as subsidizing renewable energy projects,

00:11:58.380 that has been a major contributing factor to recent price increases in energy costs, especially in the

00:12:05.780 province where I live in Ontario. And this is according to the province's own Auditor General.

00:12:11.060 In fact, in Ontario, where Prime Minister Justin Trudeau's former right-hand man, Jerry Butts,

00:12:16.340 helped to implement the Green Energy Act, that act alone has caused Ontarians to pay

00:12:21.880 tens of billions of dollars over the past few years, in recent years, above market rates for

00:12:28.040 electricity costs. But of course, one of the worst government policies for driving up the cost of

00:12:32.880 groceries is the federal government's carbon tax. Grocery stores don't grow their own food on site,

00:12:38.640 obviously. Everything that is on a shelf in a grocery store has been transported there by a truck

00:12:44.440 that uses fuel that's charged the carbon tax. In this way, the carbon tax raises the cost of every

00:12:50.880 single grocery item in Canada. Full stop. But the carbon tax drives up the cost of groceries in more

00:12:56.700 than just transportation costs. According to a report from the Canadian Federation of Independent

00:13:01.640 Business, 94% of farmers in the field crop sector and 93% in the livestock sector said the federal carbon

00:13:09.240 tax was negatively affecting their business. When farmers' costs go up, grocers' costs go up too.

00:13:15.000 And ultimately, that bill is passed down to the consumer. So again, the carbon tax is the single

00:13:19.820 most obvious government policy in Canada that's driving up the cost of groceries. But of course,

00:13:24.680 the federal government didn't stop there. Let's move on. Payroll taxes. Now, leftist politicians love to 0.99

00:13:31.160 charge corporations different taxes. They pay a lot of tax in this country. But of course, what they don't

00:13:37.080 consider is that those taxes are not just absorbed charitably by the businesses, they're passed on to

00:13:42.380 consumers. And so although you might notice on your paycheck, you pay payroll taxes of EI and CPP,

00:13:47.760 what you may not know is that those fees are matched by your employer. So they match the tax,

00:13:54.080 the payroll taxes that you pay. Despite the pandemic, the government has raised these taxes

00:13:58.520 and plans to raise them again soon. So that's just one more tax that the federal government is going to

00:14:03.800 raise on grocers. And of course, that will be passed down to your grocery bill. Now let's talk

00:14:09.060 about the federal government's fertilizer restrictions. Canada has a fertilizer emissions reduction target of

00:14:14.760 30% from 2020 levels by 2030. BNN Bloomberg explains how less fertilizer means, quote,

00:14:21.660 higher prices for every plate of food. They state this, nitrogen-based fertilizers are the most

00:14:28.120 important crop nutrients, and they're made through a process dependent on either natural gas or coal.

00:14:33.920 So basically, as governments reduce their country's use of fertilizer, which this government

00:14:39.140 is aiming to do through this policy, crop yields dwindle and grocery prices soar. And as if this

00:14:45.800 list isn't already long enough, let's now look at the federal government's problems that they created

00:14:50.120 at the border because of COVID-19. According to a report from the OECD, as a result of COVID-19,

00:14:56.460 disruptions in cross-border trade have led to a new world of trade costs. These include new protocols,

00:15:02.440 additional border controls, new documentation requirements for shippers and traders.

00:15:06.740 Canada as a country is very dependent on food imports, and many of those come across the border

00:15:12.060 from the United States. So as the government tacked on more and more restrictions for all of these 0.97

00:15:18.140 truckers trying to cross into our country from the US, that added another layer of bureaucracy and

00:15:23.080 complication to increasing Canada's food supply. And as we know, when supply goes down and demand either

00:15:28.080 stays the same or goes up, as it did during the pandemic, prices tend to soar. Next up, a weak Canadian

00:15:34.040 dollar. So the Canadian dollar is fairly weak right now. It's at about 73 cents on the US greenback.

00:15:40.400 And the issue with that, as I just mentioned, is that Canada imports a lot of its food. For example,

00:15:46.240 about two thirds of all produce consumed in Canada are imported. Given that we rely so heavily on food

00:15:52.300 imports in this country, anytime the Canadian dollar is weak means that food costs go up. Now,

00:15:57.360 there are a lot of factors that go into where the dollar stands comparatively to the US,

00:16:01.460 but one thing that the Canadian government could be doing to really bolster the Canadian dollar would

00:16:07.460 be to focus on economic growth and good solid economic fundamentals that would attract foreign

00:16:12.280 investment into the country. Instead, this federal government has been spending quite recklessly,

00:16:17.060 obviously, over the past few years. In fact, since 2015, since it was elected, basically, given that

00:16:22.440 it has yet to balance a budget. And that tends to have the opposite effect of scaring foreign investment

00:16:27.720 because it doesn't seem like it would be that safe necessarily in this country when our government is

00:16:32.660 that irresponsible. Now, last but far from least, the government policy in Canada that has a massive

00:16:39.040 impact on food prices would be supply management. So for those of you who are unaware, supply management

00:16:45.520 is a system that basically allows dairy, poultry and egg producers to limit the supply of their products

00:16:51.720 so that they can control the price that Canadians pay for those products. Now, this is a Canadian policy

00:16:57.660 with multi-partisan support. But the problem is that the Canadian Dairy Commission just raised prices

00:17:03.560 really sharply on milk and butter at a time when Canadians can afford these price increases the least.

00:17:09.500 So on September 1st, for example, the price that farmers got for their milk increased by 2.5%.

00:17:14.180 But that was after an 8.4% increase just as soon as this past February. And of course, what those

00:17:21.820 increases at the producer level will translate into at the retail level, we don't know, but it's

00:17:27.660 obviously going to be more. In the farmer's defense, and full disclosure, I'm from a farming family,

00:17:32.880 the farmers say that these price increases aren't enough to cover the cost increases in both fuel and

00:17:38.700 fertilizer. But we've already discussed how this government and through their many policies,

00:17:43.780 environmental policies, they are responsible for driving up the cost of both of those things.

00:17:49.300 So to conclude, the government should stop passing the buck and actually take responsibility for how

00:17:53.860 their policies have driven up the cost of groceries in Canada. Government's policies on energy, the

00:18:00.000 carbon tax, payroll taxes, fertilizer, the border, the economy, and the weakened dollar as well as supply

00:18:06.180 management have all contributed to massive grocery bills that Canadians cannot afford. So it's time that

00:18:12.280 leftist politicians stop pointing the finger and instead look at the mirror if they're really

00:18:16.560 wondering why groceries are so expensive in Canada. That's our show for this week. Thanks so much for

00:18:20.940 listening. And if you enjoyed this content, and you think that the work that we do is important,

00:18:24.760 then please consider supporting it. Visit donate.tnc.news to support our work and make a donation.

00:18:31.060 I'm Jasmine Mullen, and this is Reality Tech.

Juno News - November 01, 2022

“Corporate greed” isn’t why groceries are so expensive

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