House committee to probe big grocers' profits, prolonging industry's PR struggle

The big grocery chains in Canada will face a parliamentary inquiry into whether they have been exploiting surging inflation to boost their profits.

The House of Commons agriculture committee voted unanimously in favor of a motion to summon grocery executives to explain why large chains are making profits.

There was an issue with signing you up. Try again.

Michael Medline, who leads Canada's second biggest supermarket chain, had previously spoken out against the push for a parliamentary inquiry.

The language used in the original proposal made it seem as though the committee had reached a conclusion. The committee removed the reference to "profit-driven inflation" and cast the probe as trying to understand why the cost of groceries are going up while large chains are making profits.

The committee was told before the vote that they had a duty to investigate how the big grocers are affecting Canadians. He read an email from an employee of a grocery company who said they had seen proof that price increases on shelves were out of line with increases in the cost of goods.

The CEO of Empire Co. said he hopes the committee focuses on facts.

"If people want to have inquiries that can help Canadians, I'm all for it," Medline said in an interview at Empire's office outside Toronto. Some reports and facts might be helpful instead of just trying to score some points by getting some grocery companies or retailers in front of parliament.

Even though his previous appearance at a parliamentary inquiry devolved into a sparring match with members of Parliament over the cancellation of their Hero Pay bonuses, Medline said he would participate in any investigation.

The last parliamentary inquiry was disappointing. It was a PR exercise if you read the transcript.

In recent weeks, Medline has stood out as a rare food CEO willing to publicly challenge economists and consumer advocates who have asked why the three dominant grocery chains in Canada are not smaller. Shoppers are facing the worst food inflation in four decades while the other two retailers fatten profit margins. At the company's annual meeting last month, Medline called the critiques "reckless and incendiary," spurred on by lazy "armchair quarterbacks" in government and media.

"From business leaders and from friends, I've never had a better reception to anything I've ever said." Something had to be said and I said it. I am happy that it got more attention than I thought.

One of the people who noticed was Jagmeet Singh, the leader of the New Democratic Party, who pointed out that Medline's total compensation was 15 per cent higher than it was in 2011. Workers at his stores got a raise. It is not possible to say yes. Instead, he took away their hero pay during the Pandemic.

The CEO of Sobeys, Michael Medline made $8.6 million last year — 15% more than the year before.Did workers at his stores get a 15% raise?No.Instead, he took away their hero pay during the pandemic.

Workers deserve better. https://t.co/neumX4Izsy

— Jagmeet Singh (@theJagmeetSingh) September 16, 2022

He has a job to do and a narrative to present.

Hero Pay and the government campaign to stop grocers from using their market power to squeeze suppliers have taken a toll on the industry. Retailers that consumers visit the most often end up facing the most questions about the cost of goods during periods of high inflation and economic uncertainty.

I'm aware of it. I don't believe it's fair in most cases If it makes us a little sharper and we can do better, that is great. If I had the chance, I would ask people to look behind the postings on social media to see what's happening.

Canada's top three grocery stores said their higher profits and wider profit margins are not related to the broader inflation story. One explanation is that pharmacy departments are benefiting from increased demand for high-margin health and beauty products now that people are going back to work.

It is difficult to figure out if the explanations are true using just the data included in public financial statements, leading to calls for a public inquiry into the source of the profits.

Robin Shaban, a former officer at the Competition Bureau and co- founder of the Canadian Anti-Monopoly Project, said last week that third-party analysis is needed to get to the bottom of the matter.

The public financial statements of Empire and its competitors show that there isn't any profiteering going on. Empire's profit fell by $1 million in its most recent quarter.

He said that the numbers told the whole story. Without inflation, we'd be doing better.

The email address is jedmiston@postmedia.