Juno News - What’s making your grocery bill so expensive？

00:00:00.240 So let's tackle first this idea of greedflation. Federal NDP leader Jagmeet Singh says that

00:00:06.640 corporate greed is the reason that groceries are so expensive in Canada. But on its face,

00:00:10.800 this is really questionable because where was corporate greed before the pandemic?

00:00:15.520 Why is corporate greed only an issue now? Did COVID-19 cause certain corporate executives

00:00:21.760 to become more greedy or care about profits more than before the pandemic? So in 2019,

00:00:27.680 they weren't greedy. And now in 2022, they're extra greedy. It just doesn't make sense.

00:00:32.080 What's really happening here is that NDP leader Jagmeet Singh is trying to score some cheap political

00:00:37.440 points because already Canadians have lost some trust in grocers after there was allegedly some

00:00:44.080 collusion going on. So Canadians trust in grocers is already somewhat compromised. Now, while it's

00:00:50.560 true that grocers in Canada have enjoyed record profits during the pandemic, record profits are

00:00:56.560 not proof of profiteering. Here's why. The NDP is only looking at the dollar amount of profits that

00:01:03.920 these grocers have earned. But a more fair metric to determine if they were profiteering would be to

00:01:09.120 look at their profit margins. If their profit margins had increased greatly during the pandemic,

00:01:14.720 then you could rightfully make an argument that yes, they're profiteering. But a report from Dalhousie

00:01:20.560 University's Agri-Food Analytics Lab produced a report analyzing the claim that greedflation is

00:01:26.480 driving the cost of groceries in Canada, and it concluded the following. Indeed, revenues have

00:01:32.080 increased dramatically, but so have the costs of goods sold. Since the start of the pandemic,

00:01:38.000 while revenues did go up, gross margins have remained relatively consistent throughout. If

00:01:44.640 quote unquote, greedflation exists, the available data suggests grocers are not responsible. So

00:01:51.200 essentially what's happening here is that for grocers, the cost of the products that they're

00:01:55.200 buying are increasing. So even though they're maintaining pretty consistent profit margins,

00:02:00.720 their total profit dollars have increased. So critics might now argue that, okay, well, if your profit

00:02:07.200 dollars are so high, then why don't you decrease your profit margin? But what they might not understand

00:02:12.640 is that grocery retailers actually face some of the lowest margins of any retail sector in the

00:02:18.800 country. Loblaws, for example, which is one of the largest grocery chains in the country,

00:02:23.280 their profit margin was actually just 3.6% last year, which is razor thin. That's why you see in the

00:02:31.680 grocery sector, it really is a volume play. If you're only making 3.6%, that's not a lot of margin for

00:02:38.080 error. And actually, conveniently, Jagreen Singh avoids the fact that Loblaws owns Shoppers Drug Mart.

00:02:44.400 And the CFO, the chief financial officer at Loblaws, clearly stated that part of the reason why their

00:02:50.320 profits increased during the pandemic was that at Shoppers Drug Mart, in their drug retail section,

00:02:55.600 they had much higher margins on services like vaccine delivery for the COVID-19 vaccine, as well as

00:03:02.480 COVID-19 testing. And I haven't heard the NDP leader complain that they administered either of those

00:03:07.040 services during the pandemic. And presumably, it was the federal government that negotiated those rates

00:03:11.760 with private drug retailers, so the finger points back at the government on that one.

00:03:16.000 So if gross margins on food retail remained pretty well stable throughout the pandemic,

00:03:21.440 it's really difficult to make the case that grocers were gouging consumers. If anything,

00:03:26.160 the question should be, why did their costs go up? Why is food becoming more expensive for them to buy?

00:03:32.560 And in that case, the fingers point back at the government, but again, we'll get to that later.

00:03:37.040 We'll see you faster.

Juno News - November 03, 2022