The most-anticipated release of the summer just dropped: The Competition Bureau’s report on Canadian grocers.
Catch-up: The Bureau launched a probe into Canadian grocers last October to determine whether a lack of market competition had contributed to elevated food prices for Canadians.
- Annual grocery inflation is currently 9.3% and grew at a 40-year high pace last year.
Why it matters: Simply, more competition is a key factor in driving down grocery bills, as a lack of competition directly correlates with fewer choices and higher prices for consumers.
What happened: The Bureau determined that Canada’s grocery sector severely lacks competition—five grocers control ~80% of the market—and is tough for new players to enter.
- Per the report, grocers obtained “modest yet meaningful” boosts in gross profit margins over the past five years, pre-dating inflationary pressures.
- “When an industry is very competitive,” the report notes, “businesses will not usually be able to increase their margins.”
- With Canadians spending ~$110 billion on groceries per year, even a 1% increase in gross margins for grocers would add over $1 billion to Canadians’ annual food bills.
What’s next: The report includes four recommendations for federal and provincial governments to increase competition, like encouraging new types of grocery businesses, helping international grocers get set, and making it easier for customers to compare prices.
Yes, but: Of course, there’s no guarantee governments will act on these ideas.—QH