What’s going on with sky-high food prices? - The Fifth Estate

In this edition of The Fifth Estate it is everywhere, you cannot escape it. High

food

prices

are a reality, but if companies make profits, they have passed on the

high

er costs they themselves are paying and then some MPs have tried to get an answer. profits are too much profit you're making more money than you've ever made now it's our turn

what

's the worst case scenario complete removal from store shelves we've teamed up with APN investigates to find out

what

's happening with

food

prices

We're

going

to a place where

high

prices are a reality, I call it the Wild West because anything goes and government efforts to lower prices can actually help a company's bottom line, it looks like the retailer gets to keep the extra money. .

I am Steven desuza, this is the Fifth Estate, what you feel to be, we are Hing for a productive meeting, thank you, the CEOs of Canada's big grocers are in the seat of The Haun, thank you president, thank you, You witness how much profit is too much profit. make more money than you've ever made how much profit is too much profit we're a big company and the numbers are big while an angry public and angry politicians search for answers about high food prices the idea that box office takers are causing inflation food is not only fake, it is impossible to POS, we at Empire are not profiting from inflation, no matter how many times you say it, write it or tweet it, it is simply not true, but for every question the CEOs had an answer, our income has increased. expenses have increased margins have not increased, they have been stable for a long time and food margins have actually decreased, so those are facts, the message from the big fundraisers was clear: they are dealing with record inflation like everyone others.

They want the same thing, that is, we continue to have better price adjustments and that it cools down and that's how it will be, but the reality is that they went to Ottawa and tried to pretend that they were victims of inflation like the rest. of us is a ridiculous claim in terms of this is a serious investigation into how this industry works the parliamentary committee was not successful Economist Jim Stanford has studied how food prices have increased and what the results of supermarkets have absolutely contributed to this inflation, they have done more than simply pass on the higher costs they have paid for their own inputs.

They've done more than that and their combined earnings in Canada have more than doubled from pre-pandemic, pre-pandemic, for the entire year. The food retail sector in Canada made about $2.4 billion in net income last year, that figure more than doubled to more than 6 billion, a record for the industry, and while inflation hit a 40-year high of the pandemic, food inflation was even higher for those who say Grocers. are profiting, the math just doesn't add up Jim Stanford has some math of his own, he says his research shows supermarket profits are rising even though Canadians are buying less food than before the pandemic and that's even more surprising Because our population has grown so much since then, there are 2.5 million more miles to feed in Canada today than when the pandemic hit, but we're buying less groceries precisely because many Canadians can't afford it, a key problem consumers can't afford. escape from the great crisis.

Grocery stores, the three largest supermarket chains own almost 2/3 of the market. The big three have multiple brands covering everything from discount to the high end - for example, L Blas owns the Shoppers Drugmart Provigo shopping center in Quebec and the no-frills state-owned companies took over independent grocers like Longos and Farm . boy and Metro own the Adonis grocery store and John Coutu Pharmacy in Quebec, all of them as well. Pharmaceuticals and cosmetics in stores he also at the hearings in Ottawa gayen Weston told MPS that's where Labl was making the profits from him. We have made it clear that it is the efficiency of our businesses and the strength of categories such as Cosmetics, including cough and cold, that have driven our growth, not food.

These are facts. The fact that a giant company like La Blas not only sells food, but also sells pharmaceuticals, medicines and all kinds of others. In some ways, things just reinforce our concern that this is a company with too much market power. Checking Weston's math is not easy. The big tax collectors submitted their public financial statements to Parliament, but the figures are not broken down by category, so it is impossible to know. where are they making money if the big fundraisers say they are not profiting from inflation then who is it became clear that we needed to go beyond the numbers and start from the beginning of the supply chain it is in my blood I love this way of life I I love working with my family.

Four generations of Lesle Kelly's family have worked this land every year. They must decide what will grow best to feed the family and the business. This season they are growing wheat, canola and lentils. I love creating food from a little. seed that is grown on our farm but is sent all over the world that loaf of bread you buy at the supermarket, the one whose price has risen 20% is made with wheat from farms like this, but Kelly says very little about what you pay gives back to your family what percentage of what we pay for a loaf of bread actually goes to you or your share of that is based on a loaf of bread, whether whole grain or white, it could be 8 to 15 cents that a farmer buys How would I get out of that loaf of bread, what do you think of that number?

Well, when some types of bread are sold in grocery stores for $6, it can hurt farmers like Kelly, they are what are called price takers, the processors who sell to determine the price and for decades it has barely budged Since 1975, the price of a bushel of wheat has remained relatively the same, but the price of loaves of bread made with that bushel of wheat has steadily increased according to the National Farmers Union. the gap between the two continues to grow. I wish we received more of that shared wallet. As a mother I am paying. I also see that I am paying a lot more to have food. um, I need it to make money. um, seeing that in the supermarket, um, they only get 8 to 15 cents, it's a gut test in this field, these were lentils that we harvested a few weeks ago, so if grain farmers aren't making more money off of them higher food prices, who is before?

We could go further on that question, we had to take a step back if we had a clear idea of ​​the problem, the Competition Bureau says that Canadians need more options, that we do not have enough information to make the best decisions when buying food and, as We found, even the information we have may be underestimating how expensive food has become Katherine Ma is a professor at Dollhous University in Halifax. She wants Canadians to know more about what they pay for food. She and her team analyze the prices of items in Canada's national nutrition system. food basket the basket helps monitor the affordability of healthy eating.

Statistics can obtain price information for 38 large urban centers. Ma chose a different approach. Our study used digital data from a larger sample of stores using L laws. Canada's largest supermarket chain M removed its websites and obtained prices from 610 urban centers of all sizes across the country over a period of 2 days and found that Canada's statistics may actually be underestimating how much prices have increased in the overall basket cost. In our study that used digital food prices at a large number of stores nationwide, we found that our estimates of Costs for the basket were approximately 4,200 to $6,000 per year higher than the statistics estimates, so, on average, 4 to $6,000 are higher than the statistics. a high number, so it's very important for us to have a conversation.

Her research found that Atlantic Canada is among the most expensive regions, and the other, the North, a place where one particular chain has a big advantage and is a venture that many in the South have likely never had. I heard about it and they almost doubled the price when we came back, no one knows what's

going

on. I call it the Wild West because anything goes, pretty much none of it, grocery prices, part 48, eight, if Canadians in the south think their food costs are high, they need to take a look north, well days, this is what $600 worth of groceries look like at nun.

High prices are a reality here and the impact of the stickers fills an entire corner of social media. Norway House is a community in northern Manitoba with a population of almost 9,000. We are just getting into home building in Norway. My APN investigation colleague Britney Guo went there in late November to find out how locals are coping with food prices that are even higher than before. The sunsets are incredible. CU. Most of the houses are located along. on the shore or along the rivers of Norway, so it's beautiful, peaceful, beautiful, peaceful and very expensive, have you noticed this?

The tension, you know, your wallet in that sense for me, yeah, because I'm, uh, I'm an old age. retired and that's what I have to survive with shopping options in Norway. Options at home are limited because there is only one store in town, in the north. The prices are very high and they do not receive their shipments on a plane. We have an all-weather road here that goes all the way here and that's what I really don't understand, like why they would keep their price so high. The North Store is at the center of daily life here.

How many people are you going to? being able to feed this, uh, I cut it up and I can make a big pot of stew and try it on 10 people, 10 people, okay, yeah, as part of our co-production. APN investigative reporter Britney Guo and I met in Toronto to go over the Northwest company's numbers, yes, they will be interesting, so it looks like in 2022 they reported 1.3 billion in sales in Canada, which is a quite significant amount. Supplies are brought to the historic Fort Norway House, the store is part of a chain owned by the Northwest company. a billion dollar business with operations around the world and is the largest player in northern northwest Canada.

The company has its roots in the 18th century. They still operate shops on the same site as their original trading posts. Tracy Galloway is a health researcher at the University of Toronto, has published several peer-reviewed articles on Northern Indigenous communities, and often meets with Northwest Company. The company has more than 100 stores throughout northern Canada. There is really limited competition in northern communities. In terms of retail stores, according to our recent research. We were looking at a subset of those communities, 83 of them, and in those communities there were 35 communities that had only one store. In 30 of those 35 communities, it was a Northwest Company store; the company has a large presence in a country, says a former employee.

The Fifth Estate store, the Northwest Company, set their prices however they wanted, no one knows what's going on. I call it the Wild West because anything goes and they take advantage of it, no one is watching and it's practically a free for all, almost wait. Until recently, Alexis worked for Northwest at one point now she works for a local food program that helps feed the elderly in the community. This is the first time she has spoken publicly about her former employer. Why did you feel it was necessary to speak? do for the elderly I see how much they struggle I see every day like the community, everyone is my family, it's really hard to see that people can't even afford a real orange, like having to literally go and put an orange in their pockets because they can't pay for the $7 orange from Northmart.

It is very sad. People, a key part of their job, change price tags on products in the store and soon say they noticed a worrying trend and noticed there were constant price increases. of almost double and I started mentioning that the front office and front office started fighting back a little bit because it's not my job to question prices. She was so outraged by the price increases that she decided to document them herself by taking hundreds of photographs before changing the stickers. like this one for olive oil, yeah, so what are we looking at here? We are looking at the original cost of the oilolive at the bottom, the 1640 9, which was originally the cost on November 9, 2022 and if you look at the top. one is the new price that was lowered from the head office in a batch on December 31, 2022 and rose by approximately $6.

It notes that non-perishable products arrive by ship; So-called sea freight deliveries occur only once or twice a day. year, so transportation costs for those ocean freight items should not fluctuate and have an effect on price, what do you think when you see this type of price increase over that amount of time? It makes you ask a lot of questions because you know they aren't. They don't pay more to receive their freight from the south, so one wonders why that cost has increased so significantly. In a statement to The Fifth Estate, the North West company said that when items such as olive oil deplete its shipping stocks, this may be the case. that an item will increase in price when it arrives by plane given the higher cost of transportation.

Did you ever show any of these photos to your managers? Yeah, I would also create tickets and send some of these and tell them this price. It doesn't look good and what was your response to that. I was often told it's none of my business, just deal with it. Yes, it says down here, while in summary, the company insists that it faces the same struggles as other northerners and that it has much higher expenses. that Southern Grocers, everything from rental utilities and building materials to transportation, the company will say that fuel costs for transportation, you know that getting items up north is no easy task and that justifies the price increases You agree with that at all, don't you?

In that pricing system you can see how much the freight costs and everything it costs to bring it in and normally I can understand that water is expensive because it's heavy, but other items that's what it's supposed to be for. which is the northern subsidy, so it is not too expensive. The subsidy is provided by a federal program called Nutrition Northern Canada. Tracy Galloway is the country's leading expert on Canada's Northern Nutrition program. The Canada North is a federal subsidy and its goal is to ensure that food is available and affordable in remote communities in the North and has been around since 2011, but we've actually had a subsidy in the Northern Communities for decades.

The previous program called food mail was run through Canada Post before 20112. The goal of the subsidy was to ensure freight costs were managed correctly. In 2012, the new Nutrition Subsidy in Northern Canada came into effect and subsidy dollars are paid directly to retailers and it is up to retailers to ensure that they manage their own transportation arrangements in a way that keeps the cost of goods down. food for people living in northern communities. The new program was to improve nutrition, address food insecurity and lower prices. Galloway says she failed to deliver, not only did food insecurity increase after the implementation of nutrition in northern Canada, which is not what she was supposed to do, but the consumption of fruits and vegetables. went down and part of the reason is that people can't afford fruits and vegetables and those are subsidized items so we really need to do something better for these people who live in these remote northern communities and we need to do it now since 2011, the El The federal government has spent almost $1 billion on this subsidy that goes directly to several Northern retailers, but Galloway questions how much has been passed on to consumers.

She found that for every dollar of subsidy retailers are spending on average only 67 cents, so a third of the subsidy cannot be accounted for and where the rest of that money goes, we don't know. I mean, in our article we called it leakage, but it looks like the retailer may be able to keep the extra money until 2020. A study by researchers at Galf University found that about 91 cents of every dollar passes through. Galloway says her research method was different, so they were comparing prices in the communities with some base price in the city of Ottawa. Well, if we look at the prices in the same community, in the same community, if a basket of goods receives an additional dollar in subsidy funds, the price of that basket of goods goes down by one dollar and what we find is that it goes down by about 67 nutritional points.

Long a source of controversy in the north, the federal government established an advisory board in 2011 to give isolated communities a voice born in a cow. Beth Kutuk is a civil attorney and joined the advisory board in 2021. I always knew it needed improvement and I think when I joined I was a little more optimistic that I would be able to learn more about how it works and then also direct it so that it could become more effective, but after two and a half years Last December, KK resigned, do you think Northern nutrition works? No, no, I don't think it will work.

The subsidy itself is given to retailers and does not pass food on to individuals, families or households, to people who need it. that subsidy, she says that when she asked questions or tried to get more information about the subsidy and how it worked, the program's bureaucracy blocked her. We're trying to find ways to make it more transparent and more accountable and I really felt that way. I was just being down, down, you can ask a question, sure, go ahead and ask all the questions you want, but we're not really going to do anything about it, so at the end of the day, why bother?

That's really how I felt. She says the lack of oversight and transparency behind pricing in North West stores became evident during the 2021 Aalt water crisis, which is why there were a lot of people posting at the time saying: I went to uh Northern to stop by uh or North Martin and to go to bu. Water, um, and it was a lot more expensive than it used to be, so there's a lot of murmuring and these rumors that water prices are going up while we're in a water crisis and, unfortunately, that's the nature of things. , TRUE? We have our suspicions that that's what they're doing, but at the end of the day, who has the evidence that residents have been struggling to get water from the river and from stores that have, unsurprisingly, increased prices? of the water?

North M had the audacity to double water prices. The Northwest disputes that in a statement to The Fifth Estate she says that the information she has received is completely inaccurate and not based on facts. When the water crisis was announced, we set water prices at Sea Lift prices despite working to fly. on a product that has a higher transportation cost, water is not covered by North's nutrition subsidy and Alexis DOD says that during her time at the company the price would fluctuate in the two years I worked for North or just under I worked for Northmart for two years.

I've seen the price increase from $36 on a 24 pack of uh bottles of water up to $56 wow, yeah, that's almost doubled, it's almost double, yeah, like other supermarkets in Canada, the Northwest company was reporting record profits, its profits in Canada increased by 120%. In 10 years it went from 69 million in 2011 to 153 million in 2021, however, it dropped slightly to 119 million in 2022, so if they made a profit of 119 million dollars, I can tell you that they also received around 67 million dollars in federal subsidy to sell food. in those communities, so that subsidy seems to be contributing to their bottom line, what do you think when you see that?

Yes, I think that's quite worrying and I think what it tells us is this form of subsidy that pays retailers directly and then expects them to act in good faith and pass on the value of the subsidy may not work, we may need action of stricter accountability within the subsidy to make sure that actually happens, but all of this is happening far from Ottawa's eyes despite numerous parliamentary hearings on food prices. None of the northern retailers testified well. I think that just replicates an old habit of not thinking about the north and not looking north because the population is smaller, but the acuity of the problem in the north is really high and has been high.

The situation has long meant that some Northern residents are returning to old communal ways of surviving. I see my grandparents prepare a meal from nothing, like they could eat a few potatoes and vegetables and a piece of meat and they could feed a whole family and then they used to just leave a big pot and whoever came in like they were free to eat, so I continue to live by that when we come back as consumers struggle to make ends meet, another group also feels the pressure from big box grocers because there is so much power and volume accumulated in so few hands, they are the gatekeepers of who is successful and who is not, who reaches the average Canadian and who doesn't.

In 1986 there were eight major grocery chains across Canada. Each one was owned by a different company. Today we have five left and three of them, Empire and Metro, control about 60% of the market, which gives them a certain level of control over consumers but also over other parts of the chain. of supply when we have an industry in which a small number of actors, three big actors, in the case of supermarkets, have so much power that they can impose it on everyone, obviously they can impose it on consumers with higher prices, they can impose it to suppliers, especially smaller ones. suppliers, who can they?

Basically, they're saying, look, if you want to have your products on our shelves, you're going to have to make a deal with us because there's so much power and volume packed into so few hands, they're whose gatekeepers. is successful and who doesn't who reaches the Canadian age and who doesn't this supplier makes a packaged snack and sells it to one of the largest supermarkets in Canada. I'm talking to you now and there's a screen where we're looking at you. Shadow, why can't you reveal your identity? There are very few people in the supply chain who are willing to speak out against practices with retailers for fear of some sort of backlash or retaliation that could come back and completely damage. your business, yes, what is the fear, what is the worst case scenario, complete removal of store shelves, if the retail section was widely dispersed among many small companies, no company alone could do that because the manufacturer of food would simply fail. the street and says well, if you don't accept it, I think I have a good product and I think this store on the street will accept it.

The Fifth Estate spoke to some medium and small suppliers who say no. have a chance against the big ERS growth first there are the fees that vendors pay listing fees just to get their products on store shelves, thousands of dollars and there is something called chargebacks where the grossest thing makes a vendor Pay more for issues that arise from everything from delivery and packaging issues. Because of the product not selling, they often seem like they are made to increase your profits, but obviously they are not 100%, many of them could be legit, just the ones that are not, it becomes very frustrating and difficult. to get some type of support or answer on what they are, this provider says the response you get from the company representative is not always helpful, you will see a return charge and dispute it but you will not receive one. the answers sometimes no and sometimes they just try to justify it and that's it, but you can't really win, only the giant multinationals seem to have influence over the big three.

Supermarkets take the battle for crisps in 2022, Pepsi Co, which owns major brands such as Lays Cheetos and Ruffles wanted to increase its prices due to higher costs. The BLS refused and said it needed to keep prices low for consumers. So, Pepsic Co withdrew its product from the shelves of La Blas and finally the two parties reached an agreement, says our source in the case of your company the battle over prices developed in a very different way you had a case in which you walked into the store to see your product tell me what you saw the price had gone up at a particular retailer how much it had gone up at least $1 and then the next week it was $2 and these prices that you had set didn't, so how did you explain or How did you find out what happened just by walking into the store?

That's how you usually find out and we have no control over how prices are set at the retail level in general, how did it make you definitely upset that it wouldn't sell at that price and if it doesn't sell like I said, I'm responsible, it would hurt me in my business? And were you ever given an explanation as to why the price was increased? They don't have to give any explanation and you asked, "You tried." Oh yeah, so how can providers level the field with the big players in Canada? The industry is drafting a grocery code. of conductThe goal is to create new rules to ensure fairness and transparency between large retailers and suppliers.

Lowering prices is not necessarily the goal of the code, but could be a result if Grocers follows the rules, but right now the code is being debated in Canada. It's voluntary, the UK started looking into this over two decades ago, so we wanted to talk to Christine, the UK's first grocery code judge, her job, making sure the code actually worked and businesses were compliant. She had the power to referee and she also had the power. investigate and find, although she only needed to conduct two investigations in 7 years, she said her role had a major impact: revenue paid to suppliers on time could no longer threaten to remove products from shelves and increase the price.

I mean, if you look at the prices statistically it tanked, as a nation, but whether that was driven by the code or not, I think it's going to be very difficult to try to get it out of what I'm absolutely sure is that I pointed out a lot of inefficiencies in At parliamentary hearings in Ottawa, all supermarket leaders agreed to a voluntary code, including lbla's Gayen Weston. We are active participants in the development of the code of conduct, but in December, as a draft approached its final stages and was endorsed by Metro and Empire Ibla dropped a bombshell in a letter.

Chief Financial Officer Richard Duin issued a seemingly dire warning: We believe the draft code runs a significant risk of contributing to higher food prices for Canadians, which could lead to product shortages and empty shelves, and conclude that the code could potentially add over a billion dollars in costs for consumers and we had some horror stories like that in the UK and none of that actually came into effect; retailers were saying there would be an implementation cost and there would be an impact on consumer prices that would increase if, you know, if the code was enforced by a judge, the opposite was not true in a statement to The Fifth Estate about the code. groceries, the company said our goal is to ensure it is the best for everyone. particularly consumers, we remain focused on delivering lower prices for Canadians, so could you tell this committee why you will not sign the code and what needs to be done to get you to sign the code?

Yes please, we will sign the code completely. We've always said we would sign the code. We just need to sign a code that does not increase the risk of food prices rising for Canadians. And as the code is currently drafted, you know, our firm belief is that it will be that way. Doing so The UK experience offers a clue as to why companies may not agree to a code of conduct accept all those fees and chargebacks. Gross controls suppliers can add to a company's bottom line, but when its came into effect, many of those charges were eliminated.

I think one of the retailers said they found out they had 30 different ways of charging suppliers for things and then by the time they were done analyzing all the issues I was raising they had narrowed it down to three underlines a voluntary code doesn't work it should be mandatory and have someone to enforce it well, we had the code for three years and they Wasn't it only when we had a judge that things started to change when we came back? Who holds the Northwest company responsible? Isn't it that your work searching for food in the north has been the traditional way of life here?

Some believe more Supporting hunting and gathering is one way to address rising food prices. Another idea is to work together to compete with the Northwest company at this time. I would like to invite everyone whose name is on the document to present an idea at a meeting. meeting in Winnipeg in December, what we're looking to do is actually as a collective, as a group, start buying in bulk and once we can buy in bulk, that will be an additional savings for our community members um, so as for the locals. store owners, member of the Constance Lake First Nation in northern Ontario, David Negan is one of the leaders of the initiative and says his hope is to lower prices but also increase access to nutritious and healthy foods, there will be competition and then prices will go down. and you know, what that means for families is that they have more purchasing power to buy milk or basic staples for life.

The Harvester support program is being carried out in cooperation with Nutrition North. It is a controversial program that some say no. properly supervising the companies that receive their subsidy now welcome them to their communities at the conference we met Wayne Walsh he is in charge of nutrition of northern Canada sat down with APN investigates to address some of the concerns about whether the subsidy of northern nutrition is working us began with Tracy Galloway's findings in 2023 that retailers like the Northwest company are not passing on a portion of the subsidy. A University of Toronto professor has published new research suggesting that for every dollar in subsidy, 33 cents are not passed on to the consumer.

How do you respond to that finding so that we are aware of the report and program officials are reviewing the report and doing the analysis? There is also another report that says that their findings showed that there was more than 90% of the subsidy was transmitted, so we were able to see both reports and if there is an issue, we will definitely have to address it to ensure that the subsidy is transmitted, so that the Northwest company reported $119 million in profits and they received $67 million in subsidies, what is your reaction when you see the profits of the Northwest company?

I am referring to the Arctic Co-op company of Northwest. I mean all retailers under the program are for-profit organizations. I'm not in a position to determine whether that's appropriate or not, that's you. I know I think it's also up to the consumer to decide whether the level of profit is acceptable or not and make decisions where they can. Who is holding Northwest Company responsible? That's not their job, so our job is to ensure that the money that we what is provided under the subsidy is used within the parameters of the program, what we found when we reviewed those measures is that Tracy Galloway says that oversight North nutrition needs to improve, there are no teeth there, there are no punishments, there is no threat of a retailer being eliminated. of the program because that would ultimately have a negative effect on consumers in a location that would further reduce competition in these remote northern communities.

We contacted the North West company, which is based in Winnipeg. The company rejected our repeated request for an on-camera interview in a statement that said Tracy Galloway's report did not accurately take into account all factors affecting prices and that a recent government audit found that funds provided were spent to the intended purposes. The federal government says it is working to reduce food prices. We have given the Competition Bureau more power to supervise the big collectors and the Minister of Industry says he is looking for foreign companies to set up shop here to give Canadians more options.

The government has said that if we don't see a satisfactory response, we're going to consider an excess profits tax like we've done in other industries or other more powerful measures to try to reduce food prices for Canadians, and so I think that CEOs understand that this is a real challenge for them and we will do it. See if they respond with something meaningful or not Every night during the harvest season, farmer Lesie Kelly works to produce healthy food for her family and her team. She hopes to be able to keep farming for a long time and maybe some of those record profits for others in the The food system seems to be enjoying it will find its way here to make dinner for my family and our friends who help us at Harvest.

This is really what it comes down to, feeding our farmers and feeding our farmers who feed Canadians. and those around the world this is what I feel, this is where I'm supposed to be and what I'm supposed to do, this is what it's all about for me.