Thank you, Mr. Chair.
In recent months, global inflation has reached heights we had not seen for decades. We understand that the cost of living, including the cost of food, is a matter of concern to Canadians, who want to understand why their grocery bill is so high today. That is why the Empire Company Limited is testifying before the committee today.
First, as a business committed to feeding families, Empire is no fan of inflation.
The inflation we have been experiencing for several months is a bad thing and is distressing for Canadians, who have to make choices and adjust their buying habits. More than ever, they have to think about what they are buying if they want to stay within their budget. It is also bad for our company, since it interferes with our operations and requires that we meet numerous operational challenges.
Second, food inflation is a global challenge caused by a set of macroeconomic factors that are influencing the costs of food production.
Regarding the cost of goods, geopolitical events and also extreme weather conditions, soaring energy costs, disruptions in the supply chain, the weaker Canadian dollar and labour shortages have created a perfect storm for our suppliers. They are now unfortunately obliged to increase the cost of the products they offer.
While we receive hundreds of requests for cost increases from our suppliers every month, we are committed to rigorously assessing each request and examining all cost factors that affect our suppliers so we can be sure of the factual justification for each request and of each component of the price increase, and so minimize the impact on our customers.
Unfortunately, present circumstances are such that our suppliers have no choice but to ask retailers for significant price increases if they are to remain profitable. Canadian farmers are particularly affected by the present macroeconomic environment. Numerous agricultural operations would actually be in great danger if suppliers and retailers did not agree to their increases.
Third, as a business, we are not profiting from inflation in any way.
Many people believe that retailers are deliberately profiting from inflation. I can't speak for the other retailers, but I can assure you that this is completely false in the case of Empire. In a very large majority of cases, the retail price increase reflects the increase in the costs requested by the suppliers. As we have said over recent months, and as our quarterly reports show, sales and profitability have remained stable in spite of the acceleration in inflation.
I would also like to point out that the retail food sector is a very low margin sector. In our case, our net margin in the last two quarters was 2.5 to 2.6%, which is consistent with our profitability in the last two years. We therefore have no choice but to adjust our retail prices; otherwise, Empire would very quickly stop being profitable.
Fourth, despite this uncertainty, we use all available levers to minimize the impact of this unprecedented inflation on our customers.
In addition to rigorous analysis of the requests for cost increases that we receive from our suppliers, we invest in numerous initiatives so we can always offer Canadians greater value. That may be by expanding our assortment of private label and large format products, by making relevant, personalized offers, and by supporting communities across Canada.
Last, we believe the Canadian government could also play a major role in helping Canadian businesses reduce their operating costs.
Every government measure to simplify the supply process, encourage immigration or promote technological innovation will be beneficial. For example, the national supply chain task force recently submitted its report to the Minister of Transport, in which there are 21 initiatives for meeting supply chain challenges in Canada.
Reducing congestion in Canadian ports, simplifying the passage of goods through the border, or responding to the labour shortage in the supply chain are examples of concrete measures that would have a major beneficial impact on the Canadian food industry and ultimately on Canadians' purchasing power.
To conclude, I want to reiterate that we are sensitive to this subject, which affects our customers directly, and we are using all available levers to minimize the impact of this inflation.
Thank you.