Response from Loblaws to the consultation on the Market study of retail grocery

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The following documents contain the written responses from organizations received by the Competition Bureau as part of its consultation on the Retail Grocery Market Study, which took place between October 14, 2022 and December 16, 2022. All organization submissions received as part of this consultation exercise are available to the public, except where confidentiality is specifically requested.

Table of Contents


Loblaw's Submission to the Competition Bureau of Canada Market Study Notice on October 21, 2022: Competition in Canada's Grocery Sector

Introduction:

In these uncertain times for Canadian consumers, Loblaw understands the Competition Bureau’s (the “Bureau”) interest in the important topic of high food prices. We welcome the opportunity to make a submission (the “Submission”) to the Bureau’s market study notice into competition in Canada’s grocery sector dated October 21, 2022 (the “Study”). The Study’s open process, where all relevant stakeholders and participants in the industry can share their perspectives, will provide the Bureau with information it needs around the competitive dynamics in the grocery industry and a deeper understanding of the complexity of rising food prices in these globally challenging times.

Every day, we are motivated to fulfill our company’s purpose of helping Canadians Live Life Well® by providing our customers with a comprehensive offering of high-quality products at affordable prices. We know that our customers have many options to meet their shopping needs and as such it is in our best interest to ensure we offer quality products at the best possible value. We understand the important role retail grocery plays as the last step in the grocery distribution chain, and our responsibility as one of Canada’s largest retailers, which is why we are making this Submission.

We are keenly aware of the impact that high inflation is having on Canadians. We have already taken steps to reduce that impact and will continue to look for ways to help Canadians manage through these difficult times. This year alone, these steps include:

  1. A price freeze on over 1,600 No Name ® products until January 31, 2023. We believe that this was the largest price freeze of any grocery retailer’s control brand products worldwide;
  2. The issuance of more than $1 billion in PC Optimum™ loyalty points to customers to enable them to reduce the cost of their purchases across our network;
  3. Providing more than $40 million to support Canadian food banks;
  4. Continuing our longstanding support for President’s Choice Children’s Charity’s focus on childhood hunger, with almost $20 million donated and raised through our network for this important work; and
  5. Continued development of our control brands to create a diverse array of innovative and quality products at lower price points for Canadians. This year alone we have introduced more than 200 such products.

With the above context in mind, in this Submission we are pleased to provide our perspective on the questions asked by the Bureau in the Study.

Executive Summary:

The Canadian grocery sector has been competitive and healthy for many years. Investments in innovation (including through technological advances) have increased convenience and choice for consumers and added to the competitive dynamic of the sector. Canadians are benefitting from a broader range of food retailers, products, services, and offerings than ever before. The Canadian grocery market is characterized by:

  • A broad range of grocery retailers and formats including some of the largest multinational retailers, four domestic national retailers, strong regional grocery chains, a large and growing number of independent grocers, as well as a range of other grocery distributors such as convenience stores, gas stations and non-food retailer stores.
  • A large variety of Canadian and international suppliers and growers supplying a broad variety of products from around the world.
  • A significant number of control brand products competing side by side with national brand products providing Canadians with a variety of different options in terms of quality and price.
  • A range of incentives, promotional and loyalty programs offered by grocers to attract and retain customers.
  • Innovative online shopping options, including food delivery services providing Canadians with choice of where, when, and how they shop.

The factors that make the Canadian grocery market highly competitive have remained constant during the past year even as inflation has increased dramatically. Consequently, the current high grocery prices in Canada cannot be attributed to changing competitive dynamics in the Canadian grocery market. Instead, the driving forces behind high food prices and the current inflationary environment in Canada are the unprecedented increases in supply chain and supplier costs that were fueled by the emergence of the COVID-19 pandemic (the “Pandemic”) and weather-related events, both of which were later exacerbated by the impact of the war in Ukraine.

These supply chain cost increases have led to significant cost increases from suppliers to Canadian grocery retailers. Since food retailers are, for the most part, distributors of products and generally work on low profit margins, when the costs of products from suppliers go up, retail prices generally have to increase too. Since food inflation accelerated in Canada in 2021, Loblaw’s food gross margin has not increased, demonstrating that Loblaw has not used supplier cost increases as an opportunity to expand the mark-up on the products that it sells.

In this Submission, we demonstrate the link between higher global supply chain and supplier costs and increased food price inflation in Canada. After a period of relatively stable annual inflation in Canada between 2017 and 2021, inflation increased significantly in the summer of 2021 across all sectors of the Canadian economy, especially food. The economies of many countries around the world have been affected by a similar inflationary pattern over the past 18 months, including other members of the G7 and the European Union (the “EU”). Canada’s inflation rate is among the lowest of this group of developed countries, indicating that it has performed better than many countries in managing global inflationary pressures.

The international market studies referenced in the Study (the “International Studies”) provide insights into other competitive grocery markets including those in the UK, Australia, Germany, and New Zealand. What is consistent between Canada and those international jurisdictions is that despite having highly competitive grocery sectors, each of these countries started experiencing high inflation and increased food prices around the same time as Canada did. This reinforces the fact that recent food price inflation is a global phenomenon and that neither the structure nor the competitive dynamics of a particular retail grocery market (whether in Canada or elsewhere) are playing a significant role in influencing how well food price inflation can be managed.

Since the Canadian grocery market is highly competitive, benefits from low barriers to entry, and continues to experience high levels of innovation, we believe that there would be little, if any, benefit to looking at what other countries have done to stimulate competition, especially as many of those markets have been more significantly impacted by food price inflation than Canada.

Therefore, the focus of the Study should be on the global challenges that have directly and negatively impacted supply chains and supplier costs and led to high food prices. The Study should consider how Canada, as part of a global economy, can better respond to these types of multi-national inflationary challenges in the future.

Question 1

To what extent are higher grocery prices a result of changing competitive dynamics in the sector? If they are, what factors may have contributed to the change in dynamics? What role did the pandemic and supply chain disruptions play?

High grocery prices in Canada are not a result of changing competitive dynamics in the market. The competitive dynamics in the Canadian grocery sector continue to intensify to the benefit of Canadians.

The Canadian grocery sector continues to be highly competitive with low barriers to entry. Over the last few years, the competitive dynamic of the market has intensified as a result of various factors, including investments and innovation. The market offers more convenience and choice for Canadians than ever before, including:

(1) A broad range of grocery retailers and formats, including some of the largest multinational grocers, compete in the Canadian grocery sector.

The large number of retailers and the ease with which they can enter the Canadian grocery market, expand and compete on key elements such as product range, quality, availability and price are together one of the strongest indicators that the market has low barriers to entry and is highly competitive. Serving a country with a population of 39 million, Canada’s grocery sector offers a wide variety of shopping options and formats to consumers, including:

  • Two large international retailers namely, Costco (which entered Canada in 1985), and Walmart (which entered Canada in 1994). These companies have grown significantly since their market entries and Costco now has over 100 stores and Walmart has over 340 stores across Canada.
  • A large number of regional and national independent grocers, with the growth of this sector of the market outpacing that of larger retailers over the last few years.
  • Four domestic grocery companies operating multiple banners across Canada, namely, Loblaw, Empire, Metro and the Pattison Food Group. These include a variety of different formats in the conventional, discount, and wholesale space.
  • Thousands of non-food retailers that offer food assortments (e.g., dollar stores, pharmacies, general merchandise stores).
  • Convenience stores, including gas stations and neighbourhood stores that sell groceries and ready-to-eat foods.
  • Specialty retailers (e.g., butchers, bakers, health-food, multi-cultural).

One of the important features of the Canadian market is that domestic and international companies compete side by side. The international retailers together represent approximately one fifth of the Canadian grocery market today. Much of their growth since their market entry has come at the expense of the large domestic grocery companies, whose market share has dropped over a similar period. The ability for international new entrants to join the market and thrive in competition with well-established domestic retailers is a sign of a healthy and competitive market.

(2) A large variety of Canadian and international suppliers and growers supply a broad range of products from around the world, contributing to the competitive dynamics of the Canadian grocery sector.

Suppliers in the Canadian grocery sector range from small local farmers and manufacturers to overseas growers to the largest international consumer packaged goods companies. A healthy tension exists between suppliers and retailers, reflecting a dynamic that produces the best outcomes for customers.

(3) An extensive number and range of products in the market.

The range of products available to meet Canadian consumers’ evolving tastes and needs has expanded over time. Customers’ demand for year-round availability of their favourite products, increasing global travel, widespread access to the internet and continued high levels of immigration have resulted in demand for a broader range of products in Canada. As a consequence, retailers and suppliers have had to develop more sophisticated operations and global supply chains, sourcing and transporting products from around the world to meet customer demands for quality, freshness, and variety.

(4) Innovation and growth of private label products provide consumers more choice.

The competitiveness of the Canadian grocery sector has encouraged various grocery retailers in Canada, including Loblaw, to develop in-house control brand products to offer Canadians. These products are often designed to provide comparable or better quality to equivalent national brand products, often at more competitive prices. A grocery market with a broad selection of national and control brand products provides consumers with a range of product choices based on their preferences. This has proven to be particularly important in this inflationary period when many customers have focused on products that provide them with the best value on a limited budget.

(5) A range of incentives, promotional and loyalty programs.

Grocers in Canada continue to compete on a range of factors including price, product ranges, quality, convenience, location and incentives such as loyalty programs. This competition provides options for Canadians to shop where and when they want and to make selections based on product features, price points and promotions that meet their needs on any day. Weekly promotional flyers have a strong presence in Canada alongside seasonal offers and loyalty rewards. These programs together with the presence of various discount shopping options throughout the industry ensure that shoppers who prioritize value have ample opportunities to meet their shopping needs. The fact that grocers continue to invest in these types of incentive, promotional and loyalty programs to attract customers is another indication of how competitive the Canadian grocery sector is.

(6) Innovation in online shopping options, including food delivery services, has expanded access to food for Canadians.

Like many retail sectors, the Canadian grocery industry has evolved over time to meet the increasing and changing needs and demands of consumers. Investments in infrastructure and technology have enabled a range of new services for customers including online shopping and food delivery (through grocers themselves and third-parties). As a result, Canadians are benefitting from more convenience and choice than ever. Shopping options are no longer restricted by the constraints of “bricks and mortar” stores such as geography or physical shopping hours. We expect these trends to continue and that the range of options available to consumers will grow.

(7) Continued investments by Canadian grocers create more choice and competition for the benefit of Canadians.

There is substantial investment and innovation in the Canadian grocery market. Grocers collectively invest billions of dollars yearly in building, renovating and updating their stores, creating new control brand products, offering new channels and more efficient operations to better serve customers. For example, during the Pandemic, many retailers had to innovate and invest in online grocery, meal kits, and home meal replacements to keep up with, and be responsive to, customer demands. Retailers need to continue to invest to attract and retain customers in a highly competitive market.

As is evident from the factors listed above, the Canadian grocery market is dynamic and healthy and operates in a highly competitive way to the benefit of Canadians.

The driving forces behind high food prices and the current inflationary environment are the global challenges arising from factors such as the Pandemic, weather related events and the war in Ukraine which have caused unprecedented increases in international supply chain and supplier costs.

As illustrated in figure 1 below, the inflation rate for food purchased at stores in Canada averaged 1.6% per year between 2017 and 2021, and only began to increase beyond that level in late summer 2021. As of October 2022, the rate was 11.0% after hitting a peak rate of 11.4% in the prior month.

Figure 1: Food inflation in Canada between 2017-2021.

Figure 1: Food inflation in Canada between 2017-2021

Sources: Statistics Canada. Table 18-10-0004-01 Consumer Price Index, monthly, not seasonally adjusted,
https://www150.statcan.gc.ca/t1/tbl1/en/tv.action?pid=1810000401

  • Figure 1: Food inflation in Canada between 2017-2021.
    Monthly Inflation Trend - Canada (Food purchased from stores - Excludes Alcoholic Beverages)
    Month %
    Jan-17 -4%
    Feb-17 -4.1%
    Mar-17 -3.6%
    Apr-17 -2.6%
    May-17 -1.2%
    Jun-17 -0.3%
    Jul-17 -0.1%
    Aug-17 0.3%
    Sep-17 0.9%
    Oct-17 0.6%
    Nov-17 0.9%
    Dec-17 1.5%
    Jan-18 1.6%
    Feb-18 1.4%
    Mar-18 0.5%
    Apr-18 0.7%
    May-18 -0.5%
    Jun-18 0.1%
    Jul-18 0.1%
    Aug-18 0.3%
    Sep-18 0.6%
    Oct-18 1.1%
    Nov-18 1.4%
    Dec-18 2.5%
    Jan-19 2.5%
    Feb-19 3.4%
    Mar-19 4%
    Apr-19 3%
    May-19 4%
    Jun-19 3.9%
    Jul-19 4.2%
    Aug-19 3.9%
    Sep-19 4.1%
    Oct-19 4.1%
    Nov-19 3.9%
    Dec-19 3.2%
    Jan-20 3.8%
    Feb-20 2.4%
    Mar-20 2.4%
    Apr-20 4%
    May-20 3.5%
    Jun-20 3%
    Jul-20 2.4%
    Aug-20 1.6%
    Sep-20 1.3%
    Oct-20 2.3%
    Nov-20 1.6%
    Dec-20 0.5%
    Jan-21 0.1%
    Feb-21 1.3%
    Mar-21 1.3%
    Apr-21 0.1%
    May-21 0.9%
    Jun-21 0.7%
    Jul-21 1%
    Aug-21 2.6%
    Sep-21 4.2%
    Oct-21 3.9%
    Nov-21 4.7%
    Dec-21 5.7%
    Jan-22 6.5%
    Feb-22 7.4%
    Mar-22 8.7%
    Apr-22 9.7%
    May-22 9.7%
    Jun-22 9.4%
    Jul-22 9.9%
    Aug-22 10.8%
    Sep-22 11.4%
    Oct-22 11%

    Sources: Statistics Canada. Table 18-10-0004-01 Consumer Price Index, monthly, not seasonally adjusted,
    https://www150.statcan.gc.ca/t1/tbl1/en/tv.action?pid=1810000401

This spike in Canadian food prices was not caused by any changes in the competitive dynamics of the Canadian grocery sector which, as we have pointed out, remain healthy. As we explain below, food inflation in Canada in 2022 is directly linked to global inflationary pressures, well beyond the control of any one participant in the Canadian grocery market and not linked to the competitiveness of the industry.

(1) Supply chain costs have inflated as a consequence of the Pandemic, weather related events and the war in Ukraine.

Pandemic lockdowns and work stoppages at farms and key food processing plants caused severe disruption to supply chains impacting global food supply, costs and ultimately prices charged to customers. The Pandemic also created labour shortages throughout the economy with the food and grocery industry disproportionately impacted. According to a recent report by the Canadian Federation of Independent Business, nearly half (48%) of agri-businesses have turned down sales or contracts because of labour shortages, while 41% have decreased their service offerings.

The war in Ukraine has also had an impact on global energy prices and food supply, as before the war both Russia and Ukraine were significant net exporters of agricultural commodities and fertilizers. In 2021, Russia and Ukraine both ranked among the top three global exporters of wheat, barley, maize, rapeseed and rapeseed oil, sunflower seed and sunflower oil, which are all key ingredients in many food products. Russia also ranked as the world’s top exporter of nitrogen fertilizers, the second leading supplier of potassic fertilizers, and the third largest exporter of phosphorous fertilizers. The disruption to the supply of these products has impacted global food supply and inflated the costs of input materials as well as finished goods.

In a globalized economy defined by an international supply chain of food and goods, the rising cost of energy, freight and shipping has had a major impact on food inflation. According to the World Bank, Russia’s invasion of Ukraine drove the World Bank’s energy price index to increase by 26.3% between January and April 2022, on top of a Pandemic related 50% increase between January 2020 and December 2021. Crude oil prices increased by 350% from April 2020 to April 2022, the largest increase in any two-year period since the 1970s. In addition to increased shipping costs, overseas shipping reliability rates plummeted in 2021 and the average days late for vessel arrival to port nearly doubled from 2019 to 2021.

Global food security, supply chains and therefore food prices continue to be impacted by weather-related events. Extreme weather conditions in Canada ranging from scorching heat and heavy rainfall, heatwaves in India and a dry summer in Western Europe have put further pressure on global crop supplies. The 2022 report of the Lancet Countdown on health and climate change noted that “climate change is increasingly undermining global food security, exacerbating the effects of COVID-19, geopolitical, energy, and cost-of-living crises”. Food commodity markets are based on supply and demand, and if supply is affected by, for example, low crop yields, markets will react.

Interest rate increases and fluctuations in foreign currency exchange rates have also impacted commodity costs for businesses. This is the case in Canada, where food retailers are typically net importers of food products, particularly from the US. The weaker Canadian dollar leads to elevated costs for imported products, and increased retail prices for consumers.

(2) Supply chain cost increases have resulted in significant supplier cost increases to grocery retailers.

As with other retail sectors, the Canadian grocery industry operates on the basis of suppliers selling products to retailers who in turn, sell them to customers in their stores and online. Retailers are, for the most part, distributors of products. Suppliers set the cost of the products; retailers then set the retail price of those products based primarily on the cost that they pay to suppliers.

The supply chain cost increases resulting from the global challenges articulated above are showing up in increased costs of products sold by suppliers to retailers. At Loblaw, in the last 12 months cost increase requests from our suppliers have been significantly higher than normal, both in terms of the number of requests and the magnitude of the cost increases. Since food retailers generally operate at very low profit margins, when the costs of products from suppliers go up, retail prices generally have to increase as well.

We have heard arguments in some sectors of the Canadian media that as a consequence of increasing food prices, grocers are profiteering from inflation. The simplest way to illustrate that this is not the case for Loblaw is to look at our food gross margin – the gap between what suppliers charge us for food products and what we charge customers for the same products.

Since inflation increased in 2021, our food gross margin has not increased - demonstrating that we have not used supplier cost increases as an opportunity to expand the mark-up that we charge on the products we sell to customers. Not only is this the right thing to do, in the highly competitive Canadian grocery marketplace, it would not make sense for us to inflate margins as customers would likely choose to shop elsewhere.

The global impact of supply chain cost inflation is illustrated in figure 2 below which shows food inflation rates in the month of October 2022, for each of the G7 countries, as well as an average across the combined countries of the EU.

Figure 2: Food Inflation Across G7 and the EU.

Figure 2: Food Inflation Across G7 and the EU

Sources: Food at Home CPI, Statistics Canada; Food and Non-Alcoholic Beverages CPI, Office for National Statistics (UK); Food and Non-Alcoholic HICP, Eurostat; Food CPI, Japan’s Statistics Bureau / e-Stat.

  • Figure 2: Food Inflation Across G7 and the EU.
    Food Inflation Across G7 and EU
      Italy France Germany USA UK EU Japan Canada
    2021 JAN 0.6 1 1.9 3.7 -0.7 1.1 -0.2 0.1
    2021 FEB 0.2 0.9 1.4 3.6 -0.6 0.9 -0.1 1.3
    2021 MAR 0 1 1.5 3.3 -1.4 0.6 -0.4 1.3
    2021 APR -0.6 -0.5 1.8 1.2 -0.4 0.1 -1.3 0.1
    2021 MAY -0.8 -0.5 1.3 0.7 -1.3 0.2 -1 0.9
    2021 JUN -0.6 -0.3 1.2 0.9 -0.6 0.4 0 0.7
    2021 JUL 0.2 0.9 4.3 2.6 -0.6 1.5 -0.6 1
    2021 AUG 0.9 1.4 4.4 3 0.3 2 -1.1 2.6
    2021 SEP 1.1 1.1 4.8 4.5 0.8 2.3 0.9 4.2
    2021 OCT 1.1 1.1 4.3 5.4 1.2 2.3 0.5 3.9
    2021 NOV 1.4 0.4 4.5 6.4 2.5 2.9 1.4 4.7
    2021 DEC 2.9 1.4 5.8 6.5 4.2 4.3 2.1 5.7
    2022 JAN 3.8 1.7 4.7 7.4 4.3 4.8 2.1 6.5
    2022 FEB 5 2.3 5 8.6 5.1 5.5 2.8 7.4
    2022 MAR 5.9 3.2 5.9 10 5.9 6.7 3.4 8.7
    2022 APR 6.5 4.2 7.9 10.8 6.7 8.6 4 9.7
    2022 MAY 7.6 4.6 10.4 11.9 8.6 10 4.1 9.7
    2022 JUN 9.2 6.3 11.8 12.2 9.8 11.6 3.7 9.4
    2022 JUL 10 7.2 13.7 13.1 12.6 12.8 4.4 9.9
    2022 AUG 10.7 8.4 15.5 13.5 13.1 14 4.7 10.8
    2022 SEP 11.8 10.6 17.4 13 14.5 15.4 4.2 11.4
    2022 OCT 13.6 12.9 18.9 12.4 16.2 17.3 6.2 11

    Sources: Food at Home CPI, Statistics Canada; Food and Non-Alcoholic Beverages CPI, Office for National Statistics (UK); Food and Non-Alcoholic HICP, Eurostat; Food CPI, Japan’s Statistics Bureau / e-Stat.

This chart demonstrates that food inflation is a phenomenon affecting a large number of developed economies around the world, which is unsurprising given the global nature of the food supply system. It is also notable that Canada ranks as having the second lowest food inflation rate among the G7 countries and therefore has fared better than many countries in terms of managing these global inflationary pressures.

In summary, Canada is facing the same pressures on food prices as other countries, each of whom is affected by global supply chain cost increases. The reason that prices of food products in Canada have increased over the last 18 months is that global supply chain costs have inflated significantly, causing suppliers to raise the cost of products supplied to Canadian food retailers during that time to also increase.

Question 2:

What can we learn from steps that other countries have taken to increase competition in this sector?

As highlighted in our response to Question 1 above, Canada’s retail grocery industry is highly competitive and food retailers are continuing to innovate for the benefit of Canadians. The International Studies provide an opportunity to compare the competitive characteristics of the Canadian grocery retail market with the markets in various other developed countries. This analysis demonstrates that on a comparative basis, the Canadian grocery sector benchmarks favourably and as a result there would be little, if any utility, in looking further into the dynamics in those markets to enhance the competitive dynamic in Canada.

(1) Comparisons with other countries cited in the International Studies

While each of the countries referred to in the International Studies has unique history, culture, geography and market conditions, key retail grocery pressures and trends are consistent across jurisdictions. The following three areas of comparison in the International Studies are worth highlighting, in assessing the Canadian retail grocery sector:

  1. number of large competitors relative to size of population;
  2. the growth and pro-competitive effects of private label products;
  3. and consumer choice and innovation.

(i) Number of large competitors relative to the size of population

The studies in Australia, the UK, and Germany found that those markets were competitive with a comparable number of national retailers relative to their populations as exist in Canada. At the time of the study:

  • The UK had a population of just over 60 million with four main retailers (Asda, Morrisons, Sainsbury’s, and Tesco). According to the UK study, competition in the UK grocery industry was “effective and delivers good outcomes for consumers”.
  • Germany, with a population of approximately 80 million, was led by four large national retailers (EDEKA, Rewe, Schwarz-Group and Aldi) that operated in a competitive market.
  • The Australian Competition & Consumer Commission’s (the “ACCC”) study closely examined Australia’s retail grocery industry and it was found to have a “workably competitive” retail grocery industry with its two biggest firms (Coles and Woolworths) reflecting its competitiveness. The ACCC concluded that “any possible weakening in the level of competition e.g., through consolidation in grocery retailing is unlikely to have been a substantial contributor to food price inflation in Australia”.

In comparison with the UK, Australian and German markets, Canada, with a population of approximately 39 million with five large retailers, is at least as competitive as those other markets. In addition, unlike many peer countries and grocery markets, foreign competitors account for roughly one-fifth of the Canadian retail grocery market, providing evidence of low barriers to entry for newcomers to the market.

(ii) The growth of and pro-competitive effects of private labels

The EU and German studies generally found that the introduction and growth of private label products to compete vigorously with national brands can contribute to a competitive grocery marketplace, providing consumers with more choice and forcing competitors to innovate on quality and price. As discussed above, the Canadian market has a robust range of private label brands across multiple grocers. Given the view from the studies that private labels contribute positively to a healthy and competitive dynamic, the strong status of private label products in Canada is another factor pointing to the relative competitiveness of the Canadian market.

(iii) Consumer choice and innovation

The International Studies found that countries benefit when there is increased consumer choice and innovation. As we highlighted in response to Question 1 above, Canada’s retail grocery industry is characterized by consumer choice and significant ongoing innovation.

(2) High food prices are global challenges and the competitive characteristics of international grocery markets do not appear to have played any role in managing those challenges.

As we highlighted in Question 1, the driving forces behind high food prices and the current inflationary environment in Canada are global in nature and have a broad, international impact. Most of the countries included in the International Studies are G7 and/or EU members, as shown in figure 2 above.

The International Studies demonstrate that although many of those countries had different characteristics in terms of geography, culture, climate, population and regulatory regime, they were all impacted by inflation in a similar timeframe and in a similar way. Put differently, even with slightly different market structures and varying numbers of large competitors, none of the markets have been insulated from the global inflationary forces and this is so even though each of the markets in the International Studies was determined by its regulatory authority to be competitive.

Since the Canadian grocery market is highly competitive, benefits from low barriers to entry, and continues to experience high levels of innovation and healthy competition, we believe that there would be little, if any, benefit to looking at what other countries have done to stimulate competition, especially as many of those markets have been more significantly impacted by food price inflation than Canada. We note that in Canada there is a separate workstream for enhancing relationships between suppliers and retailers through a grocery code of conduct, which we are participating in.

Question 3:

How can Governments lower barriers to entry and expansion to stimulate competition?

As we have described throughout this Submission, the Canadian retail grocery sector is a competitive and diverse market. Retailers and Canadians benefit from a competitive and accessible international supply chain of goods, backed by Canada’s open trade regime. Given that the retail grocery market in Canada is competitive and innovative with low barriers to entry and expansion, there are no material changes that the government needs to make to lower barriers to entry or expansion to this market.

Submission Conclusion:

We hope that we have provided you with enough information in this Submission to help inform your understanding on the cause of high food prices.

We look forward to your report on this Study which we hope will consider how Canada, as part of a global economy, can better respond to these types of multi-national inflationary challenges in the future.