Agriculture Committee on Dec. 5th, 2022

[Rechie Valdez, Liberal, Mississauga—Streetsville, ON]

Thank you.

Mr. Hussain, you were talking about profit margins earlier. Can you clarify how Loblaw accounts for net earnings? In other words, how has Loblaw made more money on health, beauty and pharmaceuticals?

[Jodat Hussain]

I think one of your honourable colleagues gave a definition that was very close to the net income definition that I cited that's used in our financial statements. Our net income margin is 3.8%, so that would be in line with generally accepted accounting principles. That's generally the foundational basis of our financial statements.

That number is inclusive of all of our businesses, including beauty, the bank and our food businesses, among other businesses that we have. We have a wholesale business, a small liquor store business and so forth.

[Rechie Valdez, Liberal, Mississauga—Streetsville, ON]

Thank you.

Mr. Littler, going back to the prices of groceries and large profits, are you able to comment on the role that pharmacies play in the price increase as a whole?

[Karl Littler]

Pharmacies, of course, are a mixed business, because while you have pharmaceuticals—the products sold by prescription and over the counter—you also have a lot of front-of-store business, and that's an increasingly important part of a number of grocers' businesses.

The other thing is that in the wake of the pandemic, you had a lot more travel. You have people going out to work again. You have people getting coughs and colds and so on, so the consumption of related products has gone up.

The other point is that those tend to be higher-margin items. There is a fierce competition around food products, particularly around food staples. There's a little more room for margin with respect to that health and beauty side. That's why it's been a really major driver while the food margins have remained flat.

[Rechie Valdez, Liberal, Mississauga—Streetsville, ON]

Thank you.

I'll go over to you, Ms. Taylor Roy.

[Leah Taylor Roy, Liberal, Aurora—Oak Ridges—Richmond Hill, ON]

Thank you very much to all the witnesses for being here.

My question follows up on Mr. MacGregor's. This question is for you, Mr. Hussain.

I had a colleague who was visiting over the weekend who works for Your Independent Grocer, which is unionized, as you mention, but most employees make between $16 and $18 an hour. She makes slightly more because she manages a large part of the store.

She was telling me that her store manager was not going to receive a bonus this year because he hadn't cut back on wages as much as corporate management had wanted him to, and they had certain targets about reducing wages in the operations.

Since you're in the financial area, I thought I would ask you why this is a target right now, given that your profits have been going up and that workers are obviously suffering from high inflation in many areas, not just food.

[The Chair, Liberal, Kody Blois]

You have about 25 seconds, Mr. Hussain.

[Jodat Hussain]

I don't think that's an accurate characterization. I don't think our bonus plan for store managers works like that, with constriction of labour dollars for a particular store impacting someone's bonus. I don't know all of our compensation plans, but I don't think that's an accurate characterization of how that works.

[Leah Taylor Roy, Liberal, Aurora—Oak Ridges—Richmond Hill, ON]

I think we're almost out of time, so perhaps you could send that to us.

[The Chair, Liberal, Kody Blois]

Unfortunately we are out of time, Ms. Taylor Roy.

[Leah Taylor Roy, Liberal, Aurora—Oak Ridges—Richmond Hill, ON]

Yes, so perhaps you could send us that information.

[The Chair, Liberal, Kody Blois]

We will now give Mr. Perron the floor.

Mr. Perron, you have two and a half minutes.

[Yves Perron, Bloc, Berthier—Maskinongé, QC]

Thank you, Mr. Chair.

Mr. Charlebois, there was a lot of discussion earlier about the carbon tax.

We recently voted an exemption for certain sectors that need the exemption. Overall, the carbon tax aims to make food cost less in the long term, and to slow climate change.

I would like to talk to you about another cost: the 35% tariff on Russian fertilizer. Canada is the only G7 country that has imposed it.

What do you think about that? Do you believe it plays a significant role in inflation at present?

[Dr. Sylvain Charlebois]

That is a very good question. I have already stated my opinion on that subject.

Personally, I don't think it is a good initiative to take. I understand the geopolitical reasoning for the decision, but penalizing producers this way may compromise our food security, not just in Canada but also elsewhere in the world. We do produce a lot of grain for the rest of the world.

However, I am also not sure that it would be a good idea to reverse that decision, because we need predictability in the markets right now. Some producers are doing their planning based on the tariff imposed.

[Yves Perron, Bloc, Berthier—Maskinongé, QC]

If that money went directly to the producers, do you think that could solve the problem?

[Dr. Sylvain Charlebois]

I don't think the tariff is influencing inflation. I think the tariff's influence is primarily on the viability of our farms. We can assume that we might lose farms because of it.

[Yves Perron, Bloc, Berthier—Maskinongé, QC]

So it is a question of food security.

Fair enough. Thank you very much.

Mr. Hussain, I am going to ask you a question and there should be about 30 seconds left once I finish.

How do you explain the fact that suppliers, agricultural producers, and even processors say their margins are shrinking, while you are able to increase your margins, or at least maintain them?

Where does the difference lie?

[Jodat Hussain]

Without knowing the specifics of which supplier is saying what, I won't be able to speak intelligently to that point. I think it's a complex landscape and—

[Yves Perron, Bloc, Berthier—Maskinongé, QC]

Vegetable producers...

[The Chair, Liberal, Kody Blois]

Mr. Perron, I'm sorry, but your time is up. You had 30 seconds, but you used almost all the time to ask the question.

Mr. MacGregor, you have the floor for two minutes and 30 seconds.

[Alistair MacGregor, NDP, Cowichan—Malahat—Langford, BC]

Thank you very much, Mr. Chair.

Mr. Hussain, I'd like to continue on that last question that was themed on the issue of trust, not only because of the issues I mentioned and the ongoing investigations that have happened from the Competition Bureau, but because Canadians' perceptions of your sector, I think you would agree, are not very good right now. They have seen the profit margins. They have seen executive bonuses. They have reflected upon what the dividend payouts are vis-à-vis workers' wages.

You're now addressing a committee of parliamentarians who will very seriously consider what Professor Charlebois mentioned: the fact that the Competition Bureau does not have enough resources. I think the pressure is on your industry either to be proactive or to find that parliamentarians will take that rein and be proactive for you.

Again, Mr. Hussain, I want to hear from you what your company in particular is going to do proactively from this point forward to try to restore the trust that has been broken by all of the events I've just mentioned.

[Jodat Hussain]

We're in the business of acquiring customers. We're in the business of making sure that the experience in our store is the best. We are obviously always proactively looking at how we can give consumers the best possible value in all our stores.

That will be the job that we'll continue to perform, and we'll continue to push back on unjustified cost increases to make sure that the basket they buy in our stores is the most competitive it can be, because our sector is very competitive. They have plenty of options to get that basket elsewhere, so it's our job to make sure that we serve them as best we can, week in and week out.

[Alistair MacGregor, NDP, Cowichan—Malahat—Langford, BC]

I'm not sure I heard specifics there.

For the last 30 seconds, Professor Charlebois, we do know there were some legislative changes implemented on the Competition Act recently. You talked about resources.

Very quickly, in a report that this committee issues with its recommendations, what kinds of specifics would you like to see specifically on the Competition Bureau? I think this is one area that we really do need to focus on.

[Dr. Sylvain Charlebois]

I think it boils down to authority and access to information and data, and how it collects data and how it manages it. Right now we're flying in the dark, and there's a lot of unfinished business, which is impacting the reputation of the industry.

I actually agree with you. I think there's a bit of a consumer trust crisis going on right now against grocers, and I'm not even sure that grocers have the answer, but the Competition Bureau could bring some light and protection for consumers.

[Alistair MacGregor, NDP, Cowichan—Malahat—Langford, BC]

Thank you.