CBC looks at rising food prices and surveys the question of the moment: are supply problems and rising costs a legitimate explanation, or are big grocery chains gouging egregious profits out of a punchy public? The observation that the chains are scooping in bigger profits than ever suggests that, while they may be paying more at wholesale, they’re also gouging extra percentages from their customers.
La Presse has an odd piece about how small independent stores are defending the chains, a spokesman saying that everyone is facing rising supply costs. But then shouldn’t chains be able to make use of economies of scale?
Marc R 02:45 on 2023-03-12 Permalink
the fundamental problem here is the big grocery chains want to express profits as a percentage and not as real dollars. loblaws for example can say their profits haven’t changed, as 3% of gross sales stays 3% of gross sales, but in real dollars the amount of those profits is increasing as they gain market share and as their revenues increase.
that’s to say, if they sold a bag of chips in 2020 for $3 while their supplier billed them $2.91, they’re getting 9 cents or 3% profit. if they sell the same bag of chips in 2023 for $3.30, while their supplier charged them $3.20, they’re getting 10 cents, or still 3% profit. Say they sell 1,000,000 bags of chips per week, that’s $10,000 weekly in real dollars, but a 0% increase in profit margin– now factor this through the whole grocery store.
Really, we need a nationalized competitor to the grocery monopoly whose mission is to maximize value to consumers rather than shareholders. That 3% profit (ie. those $1.9 billion when you roll it up through the whole store) could be spent on subsidizing staples or hiring better talent to drive down supplier costs, rather than paying dividends.
while we’re at it, we should have a nationalized competitor to telecoms and banks as well but thats a different topic 🙂
Ephraim 19:01 on 2023-03-12 Permalink
The REAL profit for the supermarket chains are the prepared foods section. They aren’t making much money on a bag of chickpeas. And even less if you actually shop the specials, especially when you see that they have put a limit… that limit usually means they are selling below cost.
I’m still paying under $3 for a pot of yogurt (650g to 750g)
But you have to watch out for the SNEAKY price increases. Barilla pasta went from 454g to 420g (See https://i.redd.it/qja09g4x59g81.jpg for an example picture). Not that I was buying Barilla’s pasta… it’s cheap pasta at a premium price. But the point here is that we need a law on package size changes, like they have in Brazil. If you don’t watch like a hawk, they will rip you off… and that’s not the supermarket, that’s the producer
jeather 09:17 on 2023-03-13 Permalink
If it were the case that they were really not making more money off food — or a higher margin, since I think they acknowledge it’s more money at the same margin — they’d actually show some data. And “well we actually have our excess profits from medicine and financial services” is not really better.
Again, American, but CEOs have said in exactly so many words that things like inflation are excuses to increase prices (or decrease package sizes). The pricing is, they know, and we know, a ratchet. Gas prices will go back down — shipping prices already have — and whatever other costs they have will go down (we know wages aren’t going up that much), but the prices won’t.
Kate 10:19 on 2023-03-13 Permalink
jeather, your link got flattened, can you paste it into a new comment and I’ll edit it back in?
Blork 10:20 on 2023-03-13 Permalink
@Ephraim, I don’t buy Barilla pasta either, and this seals it. European pastas are usually packaged in 500g packs, and you can forgive them for changing to 454g for the American market (stupid as that is, it’s at least understandable). But changing from 454g to 410g is just so random. WTF is 410g? If they made it 400g they could argue it was four 100g servings, but 410g is so very obviously nothing more than a kick in the crotch to the consumer.
I’ll be really sad if the brand I’m loyal to pulls something like that.
Ephraim 10:21 on 2023-03-13 Permalink
@jeather – Which is why people need to stop spending discretionary spending and even discretionary spending a the supermarket. Those prices will come down if people stop buying them. That’s how inflation is stopped… when demand goes down.
But the Canadian government made a mistake a LONG time ago with credit card interest. There should have been a cap on the interest rate on CC that is x points above the lending rate. If they did this, the amount of credit available would decrease, because the banks can’t rely on the stupid people paying them usury rates that make up for bankruptcies and fraud. Banks would be a LOT more careful with how much credit they give you. Which is how Quebec stepped in and set up a higher minimum payment. But that’s an important part of how to stop inflation… stop the amount of spending on CC that people can do.
jeather 10:24 on 2023-03-13 Permalink
https://pluralistic.net/2023/03/11/price-over-volume/
jeather 10:29 on 2023-03-13 Permalink
This isn’t all discretionary spending in a supermarket. Loblaws owns Pharmaprix/SDM and PC financial. Metro owns Jean-Coutu and Brunet. (I admit I sometimes buy cleaning and related stuff in a grocery store because I am already there.)
Ephraim 10:52 on 2023-03-14 Permalink
@jeather – When I’m talking about discretionary spending at the supermarket, I’m talking about high end products, aged beef, prepared salads… anything that isn’t a basic need. The McCain Deep ‘n Delicious frozen cake… the stuff you can easily skip. The more people skip buying anything but their basic needs, the faster these prices will drop. If no one is buying Barilla pasta, they will either drop the price or come out with “new packaging” giving more product. Most of the other brands are still 454g and on sale for $1. If their product doesn’t move, they will get the message.