Inflationary year was a great one for Loblaw, report finds

Loblaw made $1 million per day in excess" profits in 2022, according to a new report analyzing rising prices in the grocery industry.

As the cost of food continues to skyrocket, Canada's three major supermarket chains - Loblaw, Empire and Metro - all made above-average profits this past year, said the report, published by the Agri-Food Analytics Lab at Dalhousie University.

But one company stands out from the rest, having made 2022 its best year yet: Loblaw.

You're looking at one grocer generating $1 million more per day based on their best performance of the last six years," said Sylvain Charlebois, who runs the lab at Dalhousie and co-authored the report. So you're starting to feel that something is going on there that would suggest that perhaps we need a little bit more transparency."

Despite the numbers, the report finds the grocery chains not guilty of greedflation." Still, the document echoes the findings of a Star investigation published in July that found the big three supermarket chains had all increased their profit margins while increasing prices.

Food purchased from stores is 11.4 per cent more expensive than it was last year, according to StatCan's most recent data, and this has focused attention on the grocery industry. Last month, the Competition Bureau launched an investigation into anti-competitive practices among supermarkets and MPs voted unanimously to condemn so-called greedflation" in the grocery industry and call on the big chains' CEOs to testify before a parliamentary committee.

The new study out of Dalhousie uses the same methodology as the Star investigation but focused on whether the grocers were guilty of greedflation," which is defined as taking advantage of high inflationary times to earn excessive profits at the expense of consumers who have limited choices when grocery shopping."

It's important to recognize that companies need to make a profit. But in food retailing, I think the question that a lot of people are asking themselves is how much is too much?" Charlebois said.

The study found current levels of gross profit were higher than the average over the last five years at all three major chains.

The Star reached out for comment to each of the three chains, which were provided with a copy of the report. Metro spokesperson Marie-Claude Bacon said the company's gross profit margins have remained stable for many years: Despite misleading claims by some, we work hard everyday to provide value to our customers and help them in the current context of global inflation," she said.

Industry group Retail Council of Canada responded by saying, Grocers' profit margins have been relatively consistent at around three or four per cent of revenues which is low relative to almost any other sector of the economy."

The overwhelming driver of price increases on the store shelf is the unprecedented price increases that grocers themselves face from their vendors," said spokesperson Michelle Wasylyshen.

The big three chains control more than 60 per cent of the grocery industry in Canada via their multiple brands and banners. Metro owns Food Basics and Jean Coutu. Empire owns Sobeys, Safeway, IGA, Foodland, FreshCo, Farm Boy and Longo's. Loblaw owns Loblaws, Superstore, Zehrs, No Frills, Shoppers Drug Mart and others.

The industry's competitive landscape remains subject to overwhelming oligopolistic pressures," the study states.

Beating the five-year average could be due to any number of factors, so the study went further to look at whether the grocery chains were topping their best quarterly gross profit from the last five years. In this analysis, one chain stood out from the others.

While Empire was $37 million below its five-year best in 2022, and Metro was $11 million short, Loblaws has outperformed its best results by $180 million.

That $180 million in excess' profit over six months is only' about a million dollars a day for them," the study states. However, grocers' margins have been historically relatively small."

Because financial statements do not break down the difference between pharmacy sales, where profit margins are higher, and food sales, where they're lower, the study was unable to determine to what extent rising food prices were behind the increased profits.

Our report does not find Loblaw, nor any of the other large Canadian grocers, guilty of Greedflation.' Rather, we conclude that based on the performance of their gross profit, Loblaw Companies Limited are outperforming even their best gross profit performance in recent years. While at the same time, many Canadians face tremendous financial hardship attempting to satisfy their basic needs of heat, shelter, and food," the study says.

Last month, Loblaw announced that it was freezing prices on its No Name brand products until next February in what it called an effort to provide grocery-bill predictability to Canadians facing the highest food inflation in decades."

The backlash was swift as social media filled with comments noting that prices were frozen at record high levels after they had been allowed to rise for over a year. Shortly afterward, Metro said it was common practice in the grocery industry to freeze prices over the holiday season.

The Star investigation published this summer found that if the grocers' margins had remained the same as they were pre-pandemic, shoppers would have saved $1.4 billion on their groceries over the last year. Since the investigation was published, overall inflation has begun to subside, but grocery inflation continues to surge.

Charlebois welcomed the new attention to food prices but lamented the lack of consumer protection in Canada.

Look at the bread price fixing scheme investigation. It's been going on for seven years and nothing has been resolved."