Thank you very much.
Hello, Chair and committee. Thank you for the invitation to speak with you again and to discuss the steps that Loblaw is taking to help Canadians.
While it appears that the peak of inflation is behind us, we know that increased food prices still have a real impact on Canadians as they try to put meals on the table, while balancing their budgets. We know that's harder today when almost everything has rapidly increased in price, including housing, heating and fuel, leaving less income for essentials like food.
It's an appalling statistic that almost 80% more Canadians turned to food banks this year compared to 2019. We all need to do more to help. This is a responsibility that we take very seriously, and one that Loblaw's entire team continues to work on.
Over the last two months we've been an active participant in discussions with government, sharing ideas and providing details about our specific actions. As we outlined in our recent letter to the committee, we focused our efforts on delivering additional value across the basket of 35 items and categories that matter most to customers—like milk, butter, eggs and chicken—where we are meaningfully lowering prices. These critical items are present in almost every grocery basket and make up nearly 10% of our sales.
We're delivering these savings through the pricing and promotional programs that customers understand and respond best to. They are making a difference. Let me give you an actual example.
On a product like chicken drumsticks, the cost to us has risen by 30% since 2019, but the investments we're making in lowering prices mean that the average price for this product over the last 12 weeks has been 4% lower than four years ago. This is on top of super-low everyday pricing in our discount stores, where we routinely sell products like bananas, sugar and milk all below cost.
We compete every day with other major grocery chains, global multinationals like Walmart and Costco, regional chains, local independents and online companies like Amazon. Canada is an extremely competitive grocery market. We know that, if we do not provide real value, customers will and do shop elsewhere.
Since the beginning of September, we've saved customers even more money through our PC Optimum points and members-only pricing, and through programs like retro pricing at No Frills and the Maxi Merci campaign in Quebec, which has served more than 2.2 million people.
We are also the only national grocer that offers price matching in all of our discount stores. Each year more than 10 million customers take advantage of this program, and in just two months we matched competitors' offers to the tune of $38 million.
Finally, in addition to those immediate steps, we are changing the way we invest in communities by opening more discount stores in more markets. By the end of next year we will have added nearly 70 new or converted discount stores, reaching an additional two million Canadians with the best combination of quality and value available in the country—on average 20% cheaper than a non-discount store.
These efforts are making an impact. We watch closely the prices in our stores and the inflation levels at our checkout. Compared to the StatsCan food CPI of 5.4% in October 2023, our internal inflation number is 5.1%. When we look at products that are actually purchased in our stores, we see that our internal inflation today is already below the overall CPI.
We are doing our part to help stabilize food prices for our customers, but as we've stated time and time again, we cannot do this alone. Recent studies from the Bank of Canada and the Competition Bureau have proven that grocery stores are not the reason for high food prices. As such, we are unable to unilaterally resolve the inflationary pressures.
As I explained to this committee earlier this year, for every $25 in groceries sold, we earn just one dollar in profit. That means that, even if this industry had zero profits, a $25 grocery bill would still cost $24.
It is important to stress that the suppliers, who make up 70% to 80% of the price of products, remain largely absent from this effort. Unfortunately, we have not yet seen a manufacturer come forward with a proposal to decrease costs. In fact, many of them are already signalling or submitting higher-than-expected cost increases for next year.
There is some good news. Food prices are definitely stabilizing, and we expect that to continue, but we are concerned that the grocery code of conduct could slow down this momentum.
When I was here with you six months ago, I voiced my support for a fair, balanced and reciprocal code. I also cautioned that a one-sided code that removes a retailer's ability to hold vendors accountable to their commitments would risk higher prices. While the principles of the code, as it's currently set up, are sound, when you get into the details there is significant risk of higher prices and empty shelves.
There is clearly a lot of passion around this subject. To inform this discussion, we have provided committee members with the latest copy of the code and the details of our concerns. I would like to share one specific example. The current drafting of the dispute resolution principle in the code gives manufacturers the ability to escalate disputes around cost increases to a yet-to-be-defined third party mechanism. In Australia, that mechanism has supported increases in costs in essentially 100% of cases. If that had happened in Canada since the beginning of last year, it would have resulted in $750 million in additional inflation pressure for consumers.
That risk is very real. On its own, it is a reason for pause. There are three other specific areas of risk in the code, including sections 2.5, 3.4 and 4.4. We have laid them out for this committee in the material provided. I'm happy to offer a more detailed perspective on any of them, but in our judgment, each one increases the likelihood of higher retail prices or less product on the shelves, directly or indirectly.
I must say that I am perplexed as to why other industry leaders are making such confident claims about the code's ability to stabilize prices when it was never intended to do so. The conversations about the code began years before inflation actually took hold. A variation of this code did not help stabilize prices in the U.K., Australia or Ireland over the last two years, none of which have lower food price inflation than Canada. I am worried that amidst our collective enthusiasm to deliver meaningful relief for Canadians on the cost of food, we are travelling in hope toward something that will do exactly the opposite simply because it sounds good. I would urge this committee to look closely at the details.
We completely agree that there is an opportunity to improve the way retailers and manufacturers work together and that there are certain things we can do differently ourselves. We are taking action on this front already. A few weeks ago, we announced our new small supplier program, delivering concrete benefits to over 1,000 manufacturers to reduce the cost and risk of doing business with us.
Either way, we will do more. We absolutely remain open to the right version of the code, but we simply must not do it at the expense of our customers. Loblaw's purpose is to help Canadians live life well. We will always be ready to do our part and to come to the table for these conversations. We will stand up for customers even if it is unpopular.
We welcome the committee's continued interest.
Thank you.
