OTTAWA—Facing political anxiety in Liberal ranks and affordability concerns from the broader population, Prime Minister Justin Trudeau took a swing at big grocery store chains on Thursday, warning that Ottawa is ready to take action against them if they don’t rein in rising food prices.
Speaking at the close of his party’s caucus retreat in London, Ont., Trudeau credited his Liberal MPs for the government’s decision to summon the heads of major grocery companies to Ottawa next week to discuss how they will “stabilize” food prices as they rake in record profits.
Trudeau said grocery chains will have until Thanksgiving to declare how they will do that. If they don’t, he said, the government is willing to take action, including through unspecified “tax measures” that will ensure food prices stop increasing and, ideally, come down.
“Large grocery chains are making record profits. Those profits should not be made on the backs of people who are struggling to feed their families,” Trudeau said.
Industry Minister François-Philippe Champagne added that the government intends to give the grocery chains “a chance” to stop increasing food prices but warned, “If they fail to act, there will be consequences.”
NDP Leader Jagmeet Singh — whose party has long called for action to curb rising grocery prices — said the move was too “vague” and fails to force big chains to act.
“Asking Galen Weston nicely to make less profits is like asking Pierre Poilievre to care about climate change,” Singh said in a written statement, referring to the head of the Loblaws grocery empire and the federal Conservative leader, respectively.
A spokesperson for the Retail Council of Canada, which represents large grocery chains, blasted the government, saying inflation isn’t caused by retailers.
“Grocer prices and profits have nothing to do with it. Simply put, the price on grocery shelves is driven by increased vendor costs from food manufacturers and producers, itself caused by a host of global factors — including supply chain challenges, the war in Ukraine, fuel prices, and climate events,” said Michelle Wasylyshen. “Grocers are always prepared to have good faith discussions with government about our industry, challenges with the food supply chain, or with affordability for Canadians. But … for any future discussions to be credible, they must include not only food retailers, but also processors, manufacturers … as well as other relevant businesses.”
A spokesperson for the Canadian Federation of Independent Grocers echoed the council.
“If the government wants a plan to make food prices more affordable, then we also need to have a plan to limit increases from suppliers,” said CFIG vice-president Gary Sands.
The invitation to grocery CEOs came the same day as Empire announced it quarterly profits. The rise was driven partly by the sale of 56 gas stations in Western Canada to Shell, but the company also saw growth in same-store sales.
Empire had profits of $261 million in the quarter ending Aug. 5, up from $187.5 million in the same period a year ago. That means the three biggest grocery retailers had a total of more than $1.1 billion in profits in their most recent quarters.
“It appears all three leading Canadian grocers are doing better than expected,” BMO equity analyst Tamy Chen said in a report on the Empire earnings.
Quarterly profits also rose in the most recent quarter for Loblaw Co. — the country’s biggest grocery retailer — and Metro Inc. In its most recent earnings announced July 26, Loblaw said profits rose 26 per cent, to $541 million. Metro, which announced its most recent earnings Aug. 9, amidst a month-long strike by workers at 37 Toronto-area stores, saw quarterly profits rise 26 per cent to $346.7 million.
The soaring profits come as grocery inflation remains persistently high. In July, Canadians were paying 8.5 per cent more for groceries than they were a year earlier. While that’s down from the 9.1 per cent annual rise seen in June, it’s still more than double the main “headline” inflation rate of 3.3 per cent.
In parliamentary hearings, grocery executives have fought against suggestions that they’re engaging in “greedflation,” and say they’re not using inflation as an excuse to raise prices higher than justified.
A Competition Bureau report earlier this year looking at the Canadian grocery industry found that a lack of competition is hurting Canadian consumers. It also found that increases in gross profit margins predate the spike in inflation that came during the COVID-19 pandemic.
“We saw Canada’s largest grocers’ food gross margins generally increase by a modest yet meaningful amount over the last five years. This longer-term trend predates the supply chain disruptions faced during the pandemic and the current inflationary period,” the Bureau said in its report.
The bureau also found that the grocery chains didn’t thoroughly co-operate with its demands for data.
“The level of co-operation varied significantly, and was not fulsome. … In many instances, the bureau was not able to obtain complete and precise financial data, despite its repeated requests.”
Thursday’s warning to grocers was paired with another policy aimed at addressing high costs, this time on housing. The government is reviving an abandoned Liberal promise from the 2015 election campaign to remove the federal sales tax on construction of new rental apartments. Ottawa will ditch the tax until 2030 in a bid to spur the creation of more affordable units, and called on provinces to follow suit by removing their own sales taxes.
Trudeau also said Ottawa will extend the deadline for small businesses and not-for-profit corporations to repay pandemic emergency loans by another year, and make changes to Canadian competition law that his office said would help “drive down costs” on groceries.
The announcements came almost exactly a year since the last national Liberal caucus retreat, when Trudeau unveiled a $4.6-billion plan that was also framed as a way to help Canadians struggling with rising costs.
This time, the new affordability measures came at the conclusion of a summit of MPs in southwestern Ontario, where Liberals met this week to discuss policies and political strategy ahead of the fall sitting of Parliament. In the weeks leading up to the meeting, several Liberals have privately criticized the direction of their government under Trudeau. Some MPs told the Star that they were disappointed and confused by the prime minister’s midsummer cabinet shuffle. Some have also expressed frustration and raised doubts about the government’s performance as Poilievre’s opposition Conservatives have taken a wide lead in national polls.
Asked Thursday about his grip on the Liberal leadership, Trudeau responded that the party stands united.
“I am so pleased to be part of this team that I have with me here today that are totally focused on building a better future for Canadians every single day,” he said.
Ahead of Thursday’s announcements, a senior NDP official said the party sees the Liberals’ weak standing in polls, and believes it has leverage under their parliamentary deal — which is supposed to keep the Liberals in power until June 2025 — to push for more federal action on housing and grocery prices.
“New Democrats are going to continue to use (our) power to force the Liberals to take urgent action for Canadians,” Singh’s statement said Thursday. “People can’t afford a government who delays and disappoints instead of delivering the help they need.”
Mike Moffatt, an economist and housing expert, presented a report he co-authored to Trudeau and the Liberal cabinet last month that called for a host of measures to boost Canada’s housing supply — including the removal of sales tax on construction of rental apartment buildings.
In an interview with the Star, Moffatt praised the decision as a smart way to help boost the economic case for constructing new rental units, especially at a time when rising interest rates and inflation have made it harder for some housing projects to get off the ground. The federal Crown housing agency has said Canada needs to boost the pace of construction to build almost 3.5 million additional housing units by 2030 to “restore affordability.”
“This is going to be hugely important as the interest rates stay high and a lot of projects had become economically unviable,” Moffatt said. “This will make the numbers work, for both for profit and not for profit.”
A spokesperson for Finance Minister Chrystia Freeland said the measure was expected to cost $4.57 billion over six years.
Speaking earlier in Vancouver, Poilievre announced housing legislation that he intends to table from the opposition benches. He outlined a six-pronged effort to spur new construction that also included a pledge to remove federal sales tax on affordable housing construction.
He claimed credit for forcing the Liberals’ hand, pointing out that they had promised to remove GST in 2015, but never followed through.
The Liberals’ 2015 campaign platform promised to remove “GST on new capital investments in affordable rental housing.”
“This morning, just as he got wind that this was going to be in my bill, he’s flip-flopped again and he expects you to believe it,” Poilievre said.
Meanwhile, the federal housing announcement was welcomed at Queen’s Park, where the Ford government has been urging the removal of sales tax on rental construction since last spring’s provincial budget.
“As we await more details, our government will work with Ottawa to ensure Ontario’s portion of the HST is removed from purpose-built rental housing as soon as possible,” said a joint statement from Finance Minister Peter Bethlenfalvy and Paul Calandra, the new minister of municipal affairs and housing.
Calandra suggested recently that Ontario could put the tax break in Bethlenfalvy’s fall economic update in November.
With files from Raisa Patel, Stephanie Levitz and Rob Ferguson
Alex Ballingall is an Ottawa-based reporter covering federal politics for the Star. Follow him on Twitter: @aballinga