The Canadian government’s strategy to make groceries more affordable failed to get full cooperation from industry leaders, aimed too low to make a meaningful difference to Canadians, and was too late to stop the most severe price increases from happening. 

Despite the federal government’s confidence that major Canadian grocers would cooperate with them to help stabilize food prices, documents obtained by Ricochet tell a different story. 

According to correspondence obtained through ATIP, in addition to stabilizing grocery prices, the federal government asked major grocers to provide monthly updates regarding their efforts to make groceries more affordable for Canadians. Ricochet obtained a letter from Empire, Sobeys’ parent company, executive vice-president and senior development officer Doug Nathanson explaining why they would not be participating in these monthly updates.

“…it is not our intention to provide advance public notice of our business plans, nor to provide periodic updates on our submission to the Government in the manner requested in your October 17, 2023 letter. Our submission stands on its own,” Nathanson wrote to the government.

The reality is, even if Canada’s major grocery chains did exactly what the government asked of them, experts say it would not have made groceries more affordable for Canadians. 

David Macdonald, Senior Economist at the Canadian Centre for Policy Alternative, told Ricochet that skyrocketing food prices have impacted people across the country. Between 2021 and 2023, there was a heightened level of anger about price increases, which resulted in increased media attention and questions asked of executives, however very little has since been done to ensure grocery giants remain accountable to Canadians. 

And, although much has changed with regard to the Canadian economy since the peak of the cost of living crisis — including a trade war with the United States and the election of a new prime minister and federal government in Canada — Macdonald says that there are lessons to be learned about how the government should respond to rapidly increasing food prices. 

“This, I think, should have renewed focus today with the threat of tariffs, counter-tariffs and their potential impact on food prices,” Macdonald said, adding that although we haven’t seen the full impact counter tariffs will have on prices, changes could be coming soon. 

“As a result we could see again a big increase in food prices, the direct result of counter-tariffs,” Macdonald said.

It was never the plan to force grocers to bring prices down

In September 2023, the executives of the “Big Five” grocery companies — Loblaw, Metro, Empire, Walmart, and Costco — were called to Ottawa to speak with the federal government about the price of groceries. 

They were there to discuss how food price increases outpaced inflation by a wide margin throughout the previous year. Grocery prices became part of a larger conversation about affordability. 

At the time, food prices were increasing at three times the rate of inflation.

Then-Deputy Prime Minister Chrystia Freeland, appearing on an episode of Power Play with Vassy Kapelos in September 2023, explained what she meant when she referred to stabilizing prices simply as, “It means they need to stop going up.”

For the government, “price stabilization” refers to a product’s price returning to be in line with inflation.

In other words, rather than making prices more affordable, price stabilization would keep prices from becoming more unaffordable. 

Freeland was confident that major Canadian grocers would cooperate to address customers’ higher grocery bills. 

“…we have a collective interest in getting prices to stabilize, and ensuring the cost of living is affordable,” Freeland told Kapelos. “We expect the grocers to play ball.”

On top of the government’s possibly misplaced confidence that major grocers would cooperate to make groceries more affordable for consumers, by the time grocers met in the fall of 2023, Macdonald said prices had risen and the damage was already done. 

“Prices on food don’t generally come down,” said Macdonald. “They surely don’t come down 10 or 20 per cent, which is what the increases that we’ve seen since 2021 (were).”

And, according to the information available from Statistics Canada’s Food Price Data Hub, grocery prices were already beginning to stabilize before this meeting even happened. 

Macdonald said there is not much you could point to from this meeting that would benefit consumers. 

“There seems to be very little that came out of this pressure that was building in the fall of 2023 in terms of tangible results,” said Macdonald.

It’s worth noting that stabilizing prices won’t undo the price hikes Canadians had already endured, said Keldon Bester from the Canadian Anti-Monopoly Project. 

Bester said the government had a difficult time getting major grocers to work with them. 

“They got the cold shoulder basically from the executives. [Executives] said ‘actually everything’s fine,’” Bester said.

Sobeys and Metro did not respond to Ricochet’s request for comment. 

Difficulty obtaining cooperation with executives

Despite the government managing to bring grocers together and offering up plans to stabilize prices, they were unable to get full cooperation from all parties.

Nathanson added that disclosing Empire’s plans was potentially dangerous for their business because it gave their competitors insights into what they were doing. He also said that it could put the company at risk of looking like they were colluding with other businesses in their industry — which could potentially get them in trouble with the Competition Bureau. 

A letter from Metro CEO Eric La Flèche to Minister François-Philippe Champagne on November 2, 2023 echoed this sentiment, saying “we are not in a position to go further and disclose commercially sensitive information.” 

Bester told Ricochet that citing competition law is just an excuse these businesses use to avoid being transparent and sending the government the information. 

Nathanson’s letter also asked why the federal government had not acted on Empire’s suggestions to help stabilize food prices. “We hope the Government also takes seriously the suggestions we provided for how it, too, might help stabilize food inflation,” he wrote. “As of this date, we have seen no action or announcements on any of the initiatives which we suggested to you that could help slow food inflation.”

Ricochet obtained a copy of the form template that grocers were provided to give their updates. Despite Nathanson’s and La Flèche’s concerns that sharing this information with the government could get grocers in trouble for perceived collaborative activity with their competitors, Ricochet has a completed form from Costco Canada, as well as Loblaws.

Other approaches to the same issue

Food price increases driven by inflation were not isolated to Canada, but other countries handled this issue very differently. 

Bester said the way the Mexican government handled major grocers in their country was more direct, and prevented prices on groceries from increasing as drastically as they did in Canada.

Last year, Mexico’s government signed an agreement to control the price of a number of “basic” foods — 24 items in the “bread basket” including pasteurised whole milk, basic cornflour, packaged bread, whole chicken, rice, vegetable oil, and canned sardines, set at a maximum price to 910 pesos (about $60CAN). Major retailers, including Walmart, agreed to the terms.

“The government really took more of a carrot and a stick approach to freezing the prices of a basket of goods, bringing grocers in and saying, basically, ‘this is the way it’s going to be,’” Bester said. 

Macdonald noted that the UK also approached grocery price increases differently than Canada. 

“They brought the big grocery stores together to offer sort of a set of basic products at lower prices for a kind of house brand,” Macdonald said. “You’ve got the cheap bread for a certain set amount, the cheap eggs for a certain set amount, that sort of thing.” 

Executives put the blame on suppliers for price increases

Grocery store executives in Canada have consistently maintained that they were not responsible for food price increases. Another letter sent to the federal government from Metro CEO Eric La Flèche blamed food suppliers for higher prices at the grocery store.

“The reality is, suppliers are driving price increases,” said La Flèche. “In the current fiscal year, Metro received 26,000 price increases, ranging between five and 10 per cent, from suppliers just for dry grocery products.”

La Flèche added that this was nearly three times the yearly average of price increases, and that grocers had no choice but to pass on these price hikes to customers. 

“We have to pass on these cost increases to our retail prices, but we do so as slowly as possible, absorbing part of the costs, and working hard everyday to deliver the best possible value,” La Flèche said.

This sentiment is shared across the industry. 

“It’s a seven layer dip type of thing, everybody gets their cut,” Bester said.  

In 2023, Canada’s big grocery chains exceeded $6 billion in profits — an increase of eight per cent from the previous year, according to the Centre for Future Work. The data found food retailers are now making more than twice as much profit as they did before the COVID-19 pandemic.

Macdonald said that in a time of conflict and uncertainty, “everybody sees an opportunity to profit.”

“Inflation indicates serious conflict within a supply chain as people try to re-jig their own profit margins and potentially benefit but also cover their losses on the other side,” he said.

Grocery code of conduct ultimately toothless

When reached for comment on major grocers not cooperating with the federal government’s request to receive monthly updates from them, a spokesperson for Innovation, Science and Economic Development Canada said too much has changed and declined to comment. 

The spokesperson pointed to the Affordable Housing and Groceries Act that received Royal Assent in December of 2023, which made changes to the Competition Act. It was then that the Government received a commitment from all major grocery retailers to adopt the Grocery Sector Code of Conduct — a non-binding industry agreement that protects small suppliers and offers very little in terms of accountability.

Macdonald said the Grocery Sector Code of Conduct has been framed as an accomplishment for affordability, but it is unclear how exactly this agreement would lower prices for Canadians. “In my mind, it has no clear relationship to food prices for consumers, even though it was touted as such,” he said. 

Bester said that the changes to the Competition Act will address some issues in the grocery industry, but more could have been done to make immediate improvements. “In the medium and long term, that’s going to have a big impact on the direction of competition — including in grocery,” he said. “But in terms of short-term changes I think they needed to be more directed.”