Greedflation in Canada’s Grocery Stores
What is greedflation?
Greedflation is a term coined to describe our current inflation rates as being fueled by greedy corporations, rather than a ‘natural increase’ of costs. We have all noticed that prices have gone a bit wild, especially in the grocery industry.
Recently, the NDP party of Canada has been pushing for an investigation into grocery profits, and the motion was passed unanimously in the House of Commons.
I was immediately interested in investigating this further and I created a TikTok series outlining the major (only?) players making up Canada’s grocery market.
Are we in a free market?
free mar·ket
[ˈˌfrē ˈmärkət]
NOUN
an economic system in which prices are determined by unrestricted competition between privately owned businesses:
"a free market in broadcasting" · [more]
The less competition that exists, the less free the market becomes. Unrestricted competition is threatened when it becomes difficult for new players to enter the market. As large conglomerates take over the industry, we’re seeing less and less new players in the game.
Largest Grocery Conglomerate in Canada: Loblaw Group of Companies
You are likely familiar with Loblaws, or the brand they own, President’s Choice. When I started digging into this company, I discovered that they own way more than I realized!
(Click on pictures throughout this blog post to take you to the corresponding TikTok Video)
My first video on TikTok in this series surrounded the above diagram showing what other stores are owned by Loblaws.
Anyone else completely unaware that Shoppers Drug Mart is owned by Loblaws?
This happens through mergers and acquisitions. All of these businesses started out independently, and at some point were bought out. The original owner walks away with a payout, and master Galen Weston walks away with less competition and we all have a less free market.
Rinse and repeat.
Price Fixing?
What happens when one party owns a majority of the competition? Price fixing and gouging, because they can. There are other conglomerates, which I will get into shortly, but the less conglomerates, the easier it is to manipulate pricing and the LESS free our market becomes.
Another not so great side effect of these large conglomerates is the difficulty this causes to small business owners. They simply can’t compete!
My goal is to help small business owners, and that is the other half of this puzzle. The big guys need to loosen the vice grip they have on the market so that others can have a chance. If you’re a small business owner, I’d love for you to grab my free accounting guide and join my mailing list!
Second Largest Grocery Conglomerate in Canada: Empire
You probably know this conglomerate best by their most well-known store: Sobeys. Empire is the parent company to Sobeys, as well as many others.
I have to hand it to Empire for this very bold name choice!
Empire was the subject of my second video in the series, and this one has had over 300k views!
Unlike the Loblaw group of companies, there isn’t any visibly obvious design elements in these logos connecting these grocery store chains, and likely many don’t realize these stores are all owned by the same company.
After these first two videos, I received a lot of comments letting me know how many stores and brands that I missed in my first go, so that made me make a third video with these additions.
It is all but assumed that there is some level of price fixing within each conglomerate. After all, they are the same company!
They have their “premium” locations and their “discount” locations, to trick you into thinking that there are affordable and fair options.
The true investigation needs to be: are these conglomerates colluding together on grocery prices? Some questions which need to be answered:
Are their year over year profits increasing in a similar fashion?
Are there many executives and C-Suite employees who “brand hop” between these two mega corps?
Do they hire similar consulting firms for “market research”?
Do they have secret shoppers in each other’s stores all day every day?
Metro has entered the chat
Our third largest grocery conglomerate in Canada is Metro, which is comprised of the following stores:
Metro was the topic of the fourth Tiktok in this series on grocery greedflation, and this one quickly became my personal favourite.
Typically when Metro buys another grocery store, they change it to a Metro instead of leaving the old name, which is a bit misleading in my opinion. Metro also does not have real estate holdings unlike Loblaws or Empire.
Financials
Diving into a financial comparison of the three conglomerates:
The above table breaks down the financials a little bit for you.
The sales numbers are in billions, and the profit margin represents the gross profit. The reason I used gross profit is because this is the profit left for the corporation to “work with” after buying the goods they sell. This shows us how much they are marking up the goods they receive, and we can see that Metro has the lowest markup.
The final two columns bring attention to the taxes paid by the corporation. The percentages are illustrating the % of sales paid in taxes. This number is a bit misleading - as tax is calculated on profits, not sales. I just wanted to show how much of the money you pay to these organizations actually ends up being paid to the government in tax.
Tax expense and taxes paid are different and this is normal! Taxes paid comes from the cash flow statement for the year, and I was unable to find a cash flow statement for Loblaws which gives this level of detail so this value is unknown.
Final Canadian Conglomerate: Jim Pattison Group
Many out in Western Canada really wanted me to cover the Jim Pattison group, claiming that he owns a LOT of stores out there. This brings me to the fifth TikTok in this Grocery Greedflation series.
It was much harder to find financial information on the Jim Pattison group, since it is a private company and is not required to publicly disclose its financial statements the way the public companies are.
Please find following all of the stores and brands owned by the Jim Pattison Group:
Since there are so many different stores listed here, I’m not sure it’s entirely appropriate to call the Jim Pattison group a grocery conglomerate, but I’m going to include here anyway.
I am trying to appeal to the billionaires such as Jim Pattison to get them to give back. I know this is a big ask, but what our world needs right now is the billionaires who are sitting on a pile of wealth and helping to fairly distribute it to society.
This may be far-fetched, but I won’t stop in my mission.