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    • What a highly anticipated report on grocery store competition reveals about profit margins, barriers

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    The Competition Bureau of Canada is calling on all levels of government to boost competition in the grocery industry, in a bid to lower prices for shoppers.

    The independent agency launched its study of Canada’s retail grocery market last October, and in its report, published Tuesday, made several recommendations to government to encourage competition in the industry.

    Namely, the Competition Bureau is recommending that Canada develop a strategy to promote new types of grocery businesses, such as online grocers, encourage independent and international grocers to enter the Canadian market, introduce unit pricing requirements, and take measures to limit property controls in the industry.

    “Canada’s grocery industry is concentrated,†the report states. “It can be difficult for small and medium-sized businesses to compete effectively against Canada’s grocery giants. It is also challenging for new businesses to enter the industry successfully.â€

    “Without changes in the competitive landscape, Canadians will not be able to fully benefit from competitive prices and product choices,†it also reads.

    The examination comes amid heightened political attention on the rising cost of groceries. In October, the House of Commons unanimously passed an NDP motion calling on the federal government to take steps to tackle "greedflation," including asking the competition bureau to investigate grocery chain profits.

    Here are the key takeaways and recommendations from the report.

    INCREASES TO MARGINS STARTED PRE-PANDEMIC

    According to the Competition Bureau, Canada’s three largest grocers — Loblaw, Sobeys and Metro — last year collectively reported more than $100 billion in sales and earned more than $3.6 billion in profits.

    “This study came at an important time,†said Anthony Durocher, deputy commissioner of the competition promotion branch at the Competition Bureau, who added grocery prices have been increasing at their fastest rate in more than 40 years, while the retail grocery industry has become increasingly consolidated.

    “We undertook this study not in response to any specific allegations of wrongdoing, but to determine whether competition issues could be contributing to rising grocery prices, and whether there are steps that governments can take to improve competition as a way to help rein in rising grocery prices,†Durocher also said.

    The Competition Bureau report meanwhile points to the grocery giants’ margins — as opposed to the cost of food, which is rising overall, or the companies’ profits — as an indicator that there is a need for more competition.

    To that end, a key finding of the report is that the country’s largest grocers’ food gross margins have increased by about one or two percentage points since 2017, so the increases started three years before the “supply chain disruptions faced during the (COVID-19) pandemic and the current inflationary period.â€

    That margin is roughly equivalent to an additional $1-2 for each $100 spent on groceries, and according to the report, “grocers make relatively little on each item, but make their profits in volume.â€

    SHOPPERS NEED MORE PRICE COMPARISON INFORMATION

    The Competition Bureau as part of its report is calling on the provincial and territorial governments to introduce rules around unit pricing information, so shoppers can make more informed decisions about where to find the best deals.

    Unit pricing shows, in addition to the total cost of a product, the price for a standard package size, for example, the cost per 100 millilitres of orange juice.

    While many places in Canada already display their unit pricing, it is only legally required in Quebec. New Zealand, Australia, and the U.K. have all implemented forms unit pricing regulations, which help consumers compare costs.

    The report recommends provincial and territorial governments work together to put in place consistent unit pricing rules across the country.

    “Competition works best when consumers know where to get the best deals,†the report states.

    MORE INDEPENDENT, INTERNATIONAL GROCERS NEEDED

    The report also calls on governments to encourage independent and international grocers to enter the Canadian market, and lays out the existing “significant barriers†for them in doing so.

    “Independents play an important role in communities across Canada, but without government support, we should not expect them to significantly expand in the near future,†the report states.

    “The entry of new competitors and growth of existing independents would increase competition, empower consumers, and drive businesses to lower prices, improve product quality, and innovate,†it also states.

    Many independent grocers, according to the Competition Bureau, must buy groceries wholesale from their competitors because they are not large enough to have their own warehouses, and they are concerned about then being bought out by a larger chain, among other challenges.

    Canada’s size and low population density also add to the challenge of building a network, while the country’s largest grocers operate thousands of stores and have an existing robust network.

    “Despite these challenges, we are of the view that attracting new grocers to the Canadian market is one of the key levers governments have to help bring about lower prices and greater choices for Canadians,†Durocher said.

    With files from CTVNews.ca Senior Digital Parliamentary Reporter Rachel Aiello

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